I
A N N U A L R E P O R T
20 16
AUSDRILL ANNUAL REPORT 2016OPERATING AND FINANCIAL REVIEW Our business at a glance �������������������������������������������������������������������������������������02
Operating and financial review �������������������������������������������������������������������������03
Financial report ������������������������������������������������������������������������������������������������������� 21
Directors’ report �����������������������������������������������������������������������������������������������22
Auditor’s independence declaration ��������������������������������������������������������38
Corporate governance statement �������������������������������������������������������������39
Consolidated statement of profit or loss �������������������������������������������������40
Consolidated statement of comprehensive income �������������������������� 41
Consolidated statement of financial position ���������������������������������������42
Consolidated statement of changes in equity ��������������������������������������43
Consolidated statement of cash flows ����������������������������������������������������44
Notes to the consolidated financial statements ����������������������������������45
Directors’ declaration ����������������������������������������������������������������������������������112
Independent auditor’s report �������������������������������������������������������������������113
Shareholder information ����������������������������������������������������������������������������123
Financial table ������������������������������������������������������������������������������������������������124
A U S D R I L L A N N U A L R E P O R T 2 0 1 6
01
A D J U S T I N G O U R F O C U S
THIS YEAR WE’VE CONTINUED TO PUT OUR ENERGIES INTO GETTING
BACK TO WHAT WE DO BEST - PROVIDING DRILLING, CONTR ACT MINING
AND EQUIPMENT SERVICES TO RESOURCES COMPANIES OF ALL SIZES.
OUR BUSINESS CONTINUES TO ADAPT IN AN EVER-CHANGING
ENVIRONMENT. WE HAVE R ATIONALISED OUR BUSINESS AND
TR ANSFORMED OURSELVES FROM A MULTI-SEGMENTED GROUP
INTO A CLIENT FOCUSED MINING SERVICES COMPANY.
AUSDRILL IS BRINGING MORE TO MINING.
WE ARE USING OUR EXPERTISE TO WORK WITH OUR CLIENTS IN MORE
INNOVATIVE WAYS TO EXTR ACT MINER ALS MORE COST EFFICIENTLY.
WE ARE CAPITALISING ON OUR LEADERSHIP WITHIN THE MINING
INDUSTRY TO CONTINUE TO REMAIN RELEVANT TO THE NEEDS OF
OUR MAJOR STAKEHOLDERS.
OUR GLOBAL REACH UNIQUELY POSITIONS US TO SERVICE RESOURCE
COMPANIES OF ALL SIZES - ANY WHERE ANYTIME.
02
O U R B U S I N E S S AT A G L A N C E
O U R B U S I N E S S AT A G L A N C E
D R I L L I N G
S E R V I C E S
E X PL OR ATION
DR ILL & BL A S T
PRODUC TION
GR A DE C ONTROL
WATER W ELL S
C O N T R A C T
M I N I N G
S E R V I C E S
SUR FACE MINING
UNDERGROUND
MINING
E X PL OR ATION
DR ILLING
E Q U I P M E N T
S E R V I C E S &
S U P P L I E S
E A R THMOV ING
FLEE T HIR E A ND SA LE S
E A R THMOV ING
EQUIPMENT PA R T S
SUPPLY A ND
L OGIS TIC S
OUR M A R K E T
OUR M A R K E T
OUR M A R K E T
Australian based provider of mining services to
the world’s leading resource companies�
African based provider of mining services to the
world’s leading resource companies�
Key services include drill and blast, grade
control, waterwell drilling, explosive supply,
exploration drilling, drill rig manufacture and
mineral analysis�
Key services include drill and blast, load
and haul, exploration drilling and equipment
hire for surface mining operations� Complete
underground mining service�
Australian based provider of mining
equipment and parts to the world’s leading
resource companies�
Key services include parts and service
exchange, equipment and parts sales,
equipment hire and equipment rebuild
and maintenance�
WH AT CH A NGED IN 2016
WH AT CH A NGED IN 2016
WH AT CH A NGED IN 2016
Synegex explosives manufacture merged
operationally into the drill and blast business�
Exploration drilling activity in Zambia
and Tanzania ceased�
ANW transport business outsourced�
Consolidation of workshop, warehousing
and support services across drilling businesses�
Equipment hire activities commenced in
Burkina Faso�
Underground mining services completed
at the Gara project for Randgold�
DT HiLoad truck tray manufacturing
business was sold to facilitate industry
rationalisation in this sector�
The DTA drill bit manufacturing
business was sold�
FUTUR E FOCUS
FUTUR E FOCUS
FUTUR E FOCUS
Continued rationalisation of the business to
extract synergies�
Establishment of operations in new
African jurisdictions�
Business improvement to generate productivity
and cost efficiencies�
Build long-term relationships through unique
and relevant offerings such as drill for equity�
Expansion of business into Africa�
Focus on implementation of lean processes
and safe productivity to reduce costs, increase
capacity and improve safety outcomes�
Greater integration with customers to reduce
equipment maintenance cost and increase
capital efficiencies�
Focus on divestment of excess to requirement
rental fleet and improving competitive position�
AUSDRILL ANNUAL REPORT 2016 03
03
O P E R AT I N G A N D F I N A N C I A L R E V I E W
H I G H L I G H T S
P R I N C I PA L A C T I V I T I E S
• Significant business turnaround delivering a reported profit
of $58�2 million�
• All major operational divisions achieved improved performance�
• Group successfully re-focused on core activities through the
sale and closure of non-core businesses�
• $35�7 million profit after tax generated from the sale of
Drilling Tools Australia (DTA) and DT HiLoad businesses�
• Strong cash flow generation of $104�1 million in
challenging market�
• Financial position of the Group remains strong with lower
gearing levels and increased cash reserves of $181�9 million�
• Long-standing exposure to gold sector has provided a
foundation for our revenue base with ~84% of mining services
revenues generated from the provision of services to gold
companies�
•
Improved safety performance across the Group�
• Board strengthened with appointment of highly experienced
director Ian Cochrane as a non-executive director and Deputy
Chairman�
Ausdrill’s key focus is providing a broad range of services to
mining clients� Ausdrill (Company or Group) has invested in people,
businesses and equipment over more than 25 years to ensure it
can successfully deliver services across every stage of the mining
lifecycle, with a particular focus on production� It is a strategy that
has delivered strong returns for the Company to date, and one which
management believes will continue to deliver in the years ahead�
In Australia, the services offered include drill and blast, grade
control, water well drilling, exploration drilling, mineral analytics
and equipment sales, hire and parts� In Africa, the Group offers load
and haul and crusher feed services in addition to all the production-
related services that the Group provides in Australia�
These service offerings are complemented by significant in-house
capabilities in the design and manufacture of drill rigs, as well as
supply and logistics services which are used in the delivery of
Ausdrill’s core services, and sold to external clients�
Through its 50-50 joint venture with Barminco Limited, African
Underground Mining Services, the Group provides specialist
underground mining services, including high speed decline
development and production�
The Australian operations are primarily based in Western Australia,
with a presence in Queensland, South Australia and New South
Wales� Ausdrill’s African operations are primarily located in Ghana,
with a presence in Mali, Burkina Faso, Guinea and Tanzania�
During 2016, the Company sold its DT HiLoad dump truck tray
manufacturing business and its DTA drilling tools manufacturing
business as part of a strategic re-focus on core activities�
Furthermore, the Group placed its Energy Drilling Australia (EDA)
oil and gas exploration and production drilling service business into
care and maintenance, with a view to selling this business when
market conditions improve�
SALES RE VENUE
($M)
743.9
EBITDA* 1
($M)
124.9
OPER ATING PROFIT BEFORE TA X * 1
($M)
24.8
1,400
1,200
1,000
800
600
400
200
0
2016
2015
2014
743.9
719�8
826�3
2013 1,128�6
2012
1,059�1
350
300
250
200
150
100
50
0
2016
2015
2014
2013
2012
124.9
110�8
173�7
272�7
288�4
160
140
120
100
80
60
40
20
0
12
13
14
15
2016
12
13
14
15
2016
12
13
14
15
2016
2016
2015
2014
2013
2012
24.8
2�1
34�4
109�5
152�5
*1 Figures exclude the effects of any significant items in prior corresponding period
Refer notes on page 19
AUSDRILL ANNUAL REPORT 2016OPERATING AND FINANCIAL REVIEW 0404
THE FOLLOW ING CH A RT S SHOW THE PERCENTAGES OF SA LES
R E V ENUE BY BUSINESS AC TI V IT Y A ND BY GEOGR A PH Y.
AUSDR ILL R E V ENUE BY BUSINE S S AC TI V IT Y (1)
AUSDR ILL R E V ENUE BY GEOGR A PH Y (1)
M A NUFAC T UR ING
SUPPLY L OGIS T IC S
1%
1%
O T HER
5%
C ON T R AC T
MINING A FR IC A
49%
E X PL OR AT ION
10%
AUS T R A L I A
49%
O T HER
4%
BUR K IN A FA S O
5%
M A L I
7%
O T HER
8%
E X PL OR AT ION
10%
PRODUC T ION
82%
AUS T R A L I A
49%
A FR IC A
47%
EQUIPMEN T
HIR E
17%
DR IL L A ND BL A S T
17%
(1) Based on FY16 sales revenue excluding intercompany sales
GUINE A
12%
GH A N A
23%
AUSDRILL’S OPER ATING BUSINESSES ARE GROUPED INTO THE FOLLOWING PRINCIPAL OPER ATING SEGMENTS:
DRILLING SERVICES AUSTR ALIA; CONTR ACT MINING SERVICES AFRICA; EQUIPMENT SERVICES & SUPPLIES; AND ALL OTHER�
REVENUE SHOWN IN THE CHART BELOW IS FOR THE YEAR ENDED 30 JUNE 2016 (F Y16) AFTER INTER-SEGMENT ELIMINATIONS�
DR ILLING SERV ICE S
AUS TR A LI A
C ONTR AC T MINING
SERV ICE S A FR IC A
EQUIPMENT SERV ICE S
& SUPPLIE S
A LL O THER
30% (2)
49% (2)
18% (2)
4% (2)
R E V ENUE (1)
$ 223 M
R E V ENUE (1)
$ 362 M
R E V ENUE (1)
$ 131 M
R E V ENUE (1)
$ 28 M
(1) Based on FY16 sales revenue excluding intercompany sales
(2) Figures may not add due to rounding
AUSDRILL ANNUAL REPORT 2016OPERATING AND FINANCIAL REVIEW
0505
The Group’s strategy continues to be focused on delivering quality mining services to key industry participants�
Consequently, Ausdrill has built long-term relationships with established gold and iron ore mining companies and
nurtures new opportunities with less established customers through innovative approaches including our drill for
equity programme�
Ausdrill’s clients include many of the world’s leading resources companies such as AngloGold, BHP Billiton, Barrick,
Gold Fields and Newmont� Ausdrill’s growth in its chosen markets has been influenced by its long-standing relationships
with these and other valued clients (in some instances, extending over more than 20 years) and continued engagement
with them as they pursue their strategies to develop and extract resources from deposits in Australia and Africa�
For the year ended 30 June 2016, approximately 84% of mining services revenues were generated from the provision of
services to gold mining companies and approximately 9% to iron ore mining companies, in each case, primarily for work
on producing mines� The mining services that the Group provides are essential to continued production and therefore the
mine owners’ ability to generate revenue�
G R O U P F I N A N C I A L P E R F O R M A N C E
$ MILLION
Continuing Operations
Sales revenue
EBITDA*
EBIT*
Profit before tax*
Profit/(loss) after tax
Discontinued Operations
Profit/(loss) after tax
Reported Profit/(loss) after tax
* Figures exclude the effects of any significant items in prior corresponding period
R E V E N U E
Sales revenue from continuing operations for the Group increased
marginally to $743�9 million� Increased revenues from the African
Mining Services segment were partially offset by the reduction in
oil and gas drilling and Drilling Services Australia segment revenue�
The Equipment Services & Supplies segment revenue was stable�
Increased mining service revenues in Africa were driven by
short-term equipment hire opportunities in Burkina Faso, prior
period rate adjustments and by favourable exchange rate impacts�
A reduction in activities was principally evident in the Drilling
Services Australia segment where lower levels of waterwell and
exploration activity were only partially offset by the increase in drill
and blast revenues which grew through the ramp-up of a number
of major contracts�
2016
2015
% CHANGE FROM PRIOR
CORRESPONDING PERIOD
743.9
124.9
56.9
24.8
20.2
37.9
58.2
719.8
110.8
37.2
2.1
(160.3)
(15.3)
(175.6)
3.3%
12.7%
52.9%
1,103.8%
112.6%
347.7%
133.1%
Sales revenue excludes Ausdrill’s 50% share of revenue generated
by the AUMS joint ventures being $76�6 million (2015: $110�1
million)� The completion of the Randgold Gara contract saw revenue
for AUMS decrease during the year� This was partially offset by
the commencement of the Geita project for AngloGold Ashanti in
Tanzania� AUMS is equity accounted and only Ausdrill’s 50% share
of net profits are included in the consolidated income statement�
AUSDRILL ANNUAL REPORT 2016OPERATING AND FINANCIAL REVIEW 06
E X P E N S E S
S E G M E N T P E R F O R M A N C E
The Group’s three largest expense categories are Materials,
Labour, and Depreciation and amortisation which represent
83�3% (2015: 83�6%) of all expenses (excluding impairment)�
Materials expenses remained largely in line with revenue growth�
However, higher maintenance costs were incurred as a result of
timing on major component change outs in Ghana and necessary
maintenance to bring idle gear back to work for new hire and
exploration projects in Burkina Faso�
Labour expenses decreased significantly, in spite of the increase
in revenue� Labour expenses reduced by $12�5 million, reducing
from 35�2% of revenue to 32�4% of revenue� Lower wages
negotiated under new enterprise agreements, coupled with lower
overhead salary costs following the restructure and rationalisation
of a number of the Group’s businesses, were the major drivers of
this improvement�
Depreciation and amortisation expenses decreased by 7�6% or
$5�6 million, as a result of the lower capital values following prior
period impairments�
E A R N I N G S F R O M C O N T I N U I N G O P E R AT I O N S
EBITDA (excluding significant items in prior corresponding period)
increased from $110�8 million to $124�9 million for the year ended
30 June 2016 and the EBITDA margin (excluding significant items
and equity accounted profits) increased from 13�6% to 15�6%� The
EBITDA margin has been positively impacted by cost-out and
restructuring activities across the Group, increased activity in Africa
and profit on the sale of drill for equity investments which totalled
$2�0 million� These were partially offset by a decline in waterwell
activity and the net foreign exchange losses which totalled $14�6
million, an increase of $6�4 million on the prior period� The equity
accounted profits from joint ventures decreased from $13�0 million
in 2015 to $9�1 million in 2016�
EBIT (excluding significant items in prior corresponding period)
increased from $37�2 million to $56�9 million for the year ended
30 June 2016 and the EBIT margin (excluding equity accounted
profits and impairment) has increased from 3�4% to 6�4%�
The operating profit before tax (excluding significant items in prior
corresponding period) increased from $2�1 million to $24�8 million
for the year ended 30 June 2016 aided by lower debt levels and
lower net interest expense�
The reported profit after tax from continuing operations for the
year totalled $20�2 million� During the year, the Group exited
and sold its DT HiLoad truck tray manufacturing business and its
DTA drilling bit manufacturing business, which together yielded a
discontinued profit after tax of $37�9 million, including profit on the
sale of these assets� Together, these resulted in a reported profit
after tax for the Group of $58�2 million�
The Group’s operations are delivered through four business
segments: Drilling Services Australia; Contract Mining Services
Africa; Equipment Services & Supplies; and All Other� Within each
of these business segments, the Group operates under a number
of brands to provide services and products to clients�
D R I L L I N G S E R V I C E S A U S T R A L I A
SEGMENT PERFORMANCE
EX TERNAL SALES
REVENUE
EARNINGS BEFORE
INTEREST AND TA X
$ MILLION
2016
2015
Drilling Services Australia
222.6
238.4
2016
21.1
2015
12.1*
*Figures exclude the effects of any significant items in prior corresponding period
Drilling Services Australia has reported an increase in profit on
the prior year in spite of continued subdued market conditions�
During the period, the business has focussed on operational
efficiency improvements, cost management strategies and
consolidation of internal services to further optimise and enhance
performance� This resulted in EBIT margins increasing from
5�1% to 9�5% during the year� New contracts in both exploration
and production drilling have been secured in the year as well as
maintaining existing works� Works at the Telfer gold-copper mine
in the Pilbara region of Western Australia commenced during the
period but were impacted by dewatering issues which are currently
being addressed� Looking forward, we will continue to focus on
operational efficiencies, and expect to see opportunities for drilling
services emerge with more recent improvements in the gold price�
DR ILL A ND BL A S T
The provision of drill and blast services to the production phase of
the mining cycle represents the foundation on which Ausdrill was
built, and this continues to be an integral part of our service offering�
In more recent years this business has been augmented by the
provision of grade control services�
During the past year, the business was successful in securing and
commencing the following works in Australia:
•
award of a new six year contract direct to Macmahon to provide
drilling services at the Newcrest owned Telfer gold-copper
mine in the Pilbara, Western Australia, which commenced in
February 2016;
• drilling and blasting services to Thiess at the Rocky’s Reward
nickel project in August 2015; and
•
award of a three year production drilling contract extension at
Ensham coal mine in Queensland�
The business operates 138 rigs comprising production blasthole
drills, purpose-built probe drills and reverse circulation (RC) grade
control drills�
AUSDRILL ANNUAL REPORT 2016OPERATING AND FINANCIAL REVIEW
E X PLOR ATION
The Australian exploration drilling business is conducted through
two businesses, one based in Kalgoorlie which primarily focuses on
gold and base metals in the Goldfields region of Western Australia
(Ausdrill), and the other based in Perth and servicing the North West
of Western Australia (ANW)� These exploration businesses operate
48 rigs comprising rotary air blast (RAB), reverse circulation (RC)
and diamond drill rigs, as well as 13 water well rigs�
In addition to term works performed for Gold Fields and BHP
Billiton Iron Ore, the business was successful in the award of
a new two year contract at Kundana and a two year contract
extension at Kanowna Belle to carry out exploration services for
Northern Star in the Kalgoorlie region� Exploration drilling services
were also provided to a range of clients in the Pilbara, Mid-West
and Goldfields regions including Doray Minerals, Dacian Gold,
Silverlake Resources and Breaker Resources�
07
O U R E D G E
WE ARE AUSTR ALIA’S L ARGEST
E XPLOR ATION AND PRODUC TION
DRILLING COMPANY
K E Y CONTR AC T S - DR ILLING SERV ICES AUS TR A LI A
The key contracts in place at 30 June 2016 for the Drilling Services Australia segment are:
PROJECT
LOCATION
SERVICES PROVIDED
CLIENT
Gold Fields
Kambalda and Granny Smith
Northern Star Resources
Kanowna Belle and Kundana
BHP Billiton
Several Pilbara mine sites
Evolution Mining
Mungari
Goldfields, WA
Goldfields, WA
Pilbara, WA
Goldfields, WA
Goldfields, WA
Ensham, QLD
Exploration drilling
Exploration drilling
Exploration drilling, drill and blast,
equipment hire
Exploration drilling, drill and blast,
grade control
Production drilling, grade control
Production drilling
KCGM
Ensham Resources
OZ Minerals
Piacentini & Son
Piacentini & Son
Macmahon
Macmahon
Thiess
Superpit
Ensham Coal
Prominent Hill Copper Gold
Prominent Hill, SA
Drill and blast
Ravensthorpe Nickel
Ravensthorpe, WA
Drill and blast
Huntly and Willowdale Aluminium
Huntly, WA
Tropicana Gold
Telfer Gold-Copper
Rocky’s Reward Nickel
Goldfields, WA
Pilbara, WA
Goldfields, WA
Drill and blast
Drill and blast
Drill and blast
Drill and blast
AUSDRILL ANNUAL REPORT 2016OPERATING AND FINANCIAL REVIEW 08
C ON T R AC T MINING S ER V IC E S A F R IC A
In Mali, AMS:
SEGMENT PERFORMANCE
EX TERNAL SALES
REVENUE
EARNINGS BEFORE
INTEREST AND TA X 1
2016
2015
2016
2015
361.9
281.4
38.9
28.3*
$ MILLION
Contract Mining
Services Africa
* Figures exclude the effects of any significant items in prior corresponding period
1 EBIT excludes AUMS equity accounted profits
The contract mining services Africa business has reported an
increase in revenue, largely driven by contract renewals, prior
period rate adjustments and the impact of the lower AUD/USD
exchange rate� EBIT margin improved in the second half of the
year, following settlement of prior period rate adjustments on the
Siguiri contract in Guinea� Underlying margins for the year were
stable, in spite of timing of major component change-outs on
trucking fleet and operational delays caused by wet weather
and travel restrictions�
A FR IC A N MINING SERV ICES ( A MS)
In Ghana, AMS:
•
•
secured a two year contract extension for mining works at the
Iduapriem mine, owned and operated by AngloGold Ashanti; and
secured a new 42 month contract to provide surface mining
services to Perseus at its Edikan gold mine, Esuajah North
deposit�
•
•
continued exploration drilling with B2Gold at its Fekola gold
project; and
continued mining the satellite pits at the Syama gold mine,
owned and operated by Resolute Mining Limited�
In Burkina Faso, AMS:
•
•
secured a six month extension until December 2016 to provide
mining equipment to Nordgold for work on its Bissa Gold
project; and
secured exploration drilling contracts with B2Gold, West African
Resources and Vital Metals� Whilst solely dependent on assay
results, AMS expects steady drilling until December 2016�
In Guinea, AMS:
•
successfully completed its second year of contract mining
works at the Siguiri mine, owned and operated by AngloGold
Ashanti�
While exploration drilling remains subdued, AMS continues to
pursue a number of contract mining opportunities, with tender
activity remaining strong, particularly in West Africa�
AMS operates over 300 major equipment units including dump
trucks, excavators, loaders, blast hole drills and grade control drills
and 22 exploration drills in West Africa�
K E Y CONTR AC T S - CONTR AC T MINING SERV ICES A FR IC A
The key contracts in place at 30 June 2016 for the Contract Mining Services Africa segment are:
CLIENT
B2Gold
B2Gold
West African Resources
Vital Metals
Cardinal Resources
Resolute
Perseus
Endeavour
AngloGold Ashanti
AngloGold Ashanti
Nordgold
Nordgold
PROJECT
Fekola Gold
Kiaka
Tanlouka
Zeko
Bolgatanga
Syama Gold
Edikan Gold
Nzema Gold
Iduapriem Gold
Siguiri Gold
Bissa Gold
Taparko Gold
LOCATION
Mali
Burkina Faso
Burkina Faso
Burkina Faso
Ghana
Mali
Ghana
Ghana
Ghana
Guinea
Burkina Faso
Burkina Faso
SERVICES PROVIDED
Exploration drilling
Exploration drilling
Exploration drilling
Exploration drilling
Exploration drilling
Open pit mining
Open pit mining
Open pit mining
Open pit mining
Open pit mining
Equipment hire
Equipment hire
AUSDRILL ANNUAL REPORT 2016OPERATING AND FINANCIAL REVIEW
09
A FR IC A N UNDERGROUND MINING SERV ICES ( AUMS)
EX TERNAL SALES
REVENUE
EARNINGS BEFORE
INTEREST AND TA X
In Ghana, AUMS:
•
is currently completing minor works at the Subika Gold Mine
for Newmont
In Mali, AUMS:
$ MILLION
AUMS (Ausdrill 50% share)
2016
76.6
2015
110.1
2016
18.2
2015
16.3
•
completed the Gara contract at the Loulo operations, for
Randgold in October 2015�
In Burkina Faso, AUMS:
•
•
commenced a 4 year contract with Roxgold at the Yaramoko
Gold project in July 2015�
commenced the final year of the 3 year contract with Nantou
(Glencore) at the Perkoa Zinc mine�
In Tanzania, AUMS:
•
commenced a 31 month contract with AngloGold Ashanti at the
Geita gold mine Star and Comet pit in Tanzania�
Ausdrill has a 50% interest in the AUMS joint venture, with Barminco
holding the other 50%� This business provides underground mining
services for clients in Ghana, Mali, Burkina Faso and Tanzania�
The Company’s share of revenue from AUMS has decreased
from $110�1 million to $76�6 million in the year to June 2016�
This is as a result of the completion of the Gara contract in
October 2015, however, this has been partially offset by the
commencement of other projects during 2016, including the Geita
project in Tanzania for AngloGold Ashanti and the Yaramoko project
for Roxgold in Burkina Faso� Earnings before interest and tax has
increased from $16�3 million to $18�2 million (being Ausdrill’s
50% share) in the year to June 2016� This is largely as a result of
a tighter control on costs and the increase in the value of AUMS’s
investment in Roxgold during 2016�
K E Y CONTR AC T S - AUMS JOINT V ENTUR E
The key clients and contracts in place at 30 June 2016 for the AUMS joint venture are:
CLIENT
Nantou
Roxgold
PROJECT
Perkoa Zinc
Yaramoko
AngloGold Ashanti
Star and Comet
LOCATION
SERVICES PROVIDED
Burkina Faso
Burkina Faso
Tanzania
Underground mining services
Underground mining services
Underground mining services
O U R E D G E
WE ARE
AFRIC A’S L ARGEST
COMPLE TE MINING
SERVICES PROVIDER
AUSDRILL ANNUAL REPORT 2016OPERATING AND FINANCIAL REVIEW 10
EQUIP MEN T, S ER V IC E S & S UP P L IE S
CONTINUING BUSINESSES
SEGMENT PERFORMANCE
EX TERNAL SALES
REVENUE
EARNINGS BEFORE
INTEREST AND TA X
$ MILLION
2016
2015
2016
2015
Equipment, Services &
Supplies
131.0
130.1
7.5
(4.3)*
* Figures exclude the effects of any significant items in prior corresponding period
Following the sale of the Drilling Tools Australia and DT HiLoad
businesses, the continuing businesses of the Equipment, Services
and Supplies segment comprise the BTP Group and Supply Direct�
All figures in the table above reflect only continuing operations�
O U R E D G E
WE ARE ONE OF AUSTR ALIA’S LE ADING
SUPPLIERS OF MINING EQUIPMENT
PARTS, SALES & RENTALS�
BTP GROUP
BTP Group is one of Australia’s largest non-OEM suppliers
of heavy earthmoving equipment solutions to the mining and
construction industries� Its offering includes service, parts,
reconditioned and service exchange for major components,
equipment rebuilds, equipment rental and used equipment sales�
BTP Group’s equipment rental offering includes an extensive
fleet of excavators, dump trucks, dozers, graders and ancillary
equipment including water carts�
Market conditions remained challenging over the past year,
particularly in the capital sales sector� There are emerging signs
that the mining production cycle is beginning to present increasing
maintenance opportunities� Over the past year, many of the
Group’s clients aggressively pursued safe production and cost
reduction strategies� Likewise, BTP Group focussed on improving
safety performance, implemented critical restructuring activities,
including downsizing its workforce by 15%, reducing its cost base,
improving operational efficiencies and refining its operating model�
In the past year, the most important achievement has been that
TRIFR safety performance improved significantly, reducing 67% to
10 per million hours worked� This achievement represents progress
on BTP Group’s objective to deliver high quality safety outcomes
throughout its operations for the benefit of employees and all
stakeholders�
BTP Group’s strategy to consolidate on its Australian opportunities
and diversify into Africa has been critical to its near and long-term
profitable growth objectives� Its non-OEM aligned equipment
solution offering provides a platform for expanded growth� Despite
ongoing difficult trading conditions over the past year, BTP Group
has been able to grow underlying product support revenue by 11%�
It has been disciplined in the higher capital intensive equipment
sales market choosing to respond to opportunities with a higher
conversion rate� In spite of flat total sales, BTP Group has been
able to deliver a significant turnaround in underlying operating
earnings performance�
In recent months, BTP Group has commenced a business-wide lean
training program to better skill its workforce in minimising waste in
its processes to further improve safety, quality and cost outcomes�
Market conditions are expected to remain challenging and BTP
Group will continue to focus on sustainable safe improvement,
delivering on customer demands and pursuing ongoing collaboration
and integration through the value chain� Over the past year, BTP
Group has invested in implementing strategies that will sustainably
benefit all stakeholders and is a conscientious nimble partner driven
to help its customers succeed�
AUSDRILL ANNUAL REPORT 2016OPERATING AND FINANCIAL REVIEW
11
SUPPLY DIR EC T
A L L O T H E R
Supply Direct provides flexible and effective supply chain and
logistic solutions predominantly to clients based in Africa, where
supply chain issues are often complex� The business strategy
to operate a bonded warehouse in South Africa has provided a
competitive advantage to its value offering� It achieved improved
financial results in FY16 in its African and UK sectors� Whilst
overall sales were flat year on year, a particular focus on enhancing
customer relationships and service delivery to drive pricing and
margin realisation was coupled with cost reduction strategies to
underpin earnings performance improvement on the prior year�
Most pleasing was a turnaround in TRFIR safety performance
having reduced to zero from a comparative of 16 per million
hours worked�
DISCONTINUED BUSINESSES
DR ILLING T OOL S AUS TR A LI A (D TA )
DTA manufactures and sells a full range of drilling consumables
and drill rig spares� Over the past year, the business has been
successful in marketing and selling both manufactured and
sourced products to a broadening range of clients� Cost reduction
activities combined with business development that focussed
on increasing demand for manufactured products formed the
basis for significant profit improvement on the prior year� In May
2016, Ausdrill announced that it had signed a Sale and Purchase
Agreement to sell the DTA business to Robit Plc, for $66 million�
This transaction was completed on 30 June 2016, with $46�2
million in proceeds being received, with the balance payable by
31 December 2016� This transaction is in line with Ausdrill’s
strategy to refocus on its core competencies whilst, at the same
time, provided value realisation for cash� Refer to note 13 of this
report for further transaction details�
DT HILOA D
DT HiLoad manufactures heavy duty light weight mining truck
trays sold under the Hercules brand� The market demand for
mining truck trays remained depressed during the year with
minimal prospect of near to mid-term turnaround� Consequently
in January 2016, after completion of a strategic review, Ausdrill
announced to market that it would exit its DT HiLoad truck tray
manufacturing business in order to facilitate industry consolidation�
The business assets were subsequently sold during March 2016
and the business has been wound down to closure� Refer to note 13
of this report for further transaction details�
SEGMENT PERFORMANCE
EX TERNAL SALES
REVENUE
EARNINGS BEFORE
INTEREST AND TA X
$ MILLION
All Other Segments
2016
28.4
2015
70.0
2016
(5.3)
2015
1.1*
* Figures exclude the effects of any significant items in prior corresponding period
The All Other segment comprises Diamond Communications,
MinAnalytical, Energy Drilling Australia and Ausdrill Properties�
DI A MOND COMMUNIC ATIONS
Diamond Communications delivered a small profit before interest
and tax for the year ending 30 June 2016�
Key contract revenue was sourced from the Western Power State
Underground Power Program and the Telstra Inter-Exchange
Network project�
The business also completed a major project for OTOC installing an
optical fibre ring around the Perth Airport airside, a relationship we
trust will continue�
Diamond Communications has been successful in winning the
Wideband contract with Telstra for another three years in Western
Australia and South Australia� Further, the business has also
been awarded the HDA contract with Telstra for work in Western
Australia, South Australia, Victoria and Queensland for the
installation of long haul NBN fibre�
MIN A N A LY TIC A L L A BOR ATORY SERV ICES
MinAnalytical Laboratory Services offers a range of high quality
analytical services for the mineral exploration and mining Industry
and is NATA accredited in accordance to ISO17025:2005�
Despite the highly competitive environment in which it operates,
MinAnalytical continues to see growth and demand for services,
particularly in the gold exploration and resource sector�
Consequently, MinAnalytical will expand its operation with the
opening of a sample preparation facility in Kalgoorlie, Western
Australia in October 2016� MinAnalytical delivered a close to
breakeven EBIT position for the period�
MinAnalytical has maintained and grown a steady portfolio of loyal
clients from junior explorers, emerging producers and miners�
ENERGY DR ILLING AUS TR A LI A (EDA )
The reduction in oil prices over the past year has resulted in the
cancellation of drilling programs which EDA expected to participate
in� Consequently, the business reported a loss before interest and
tax of $6�8 million for the year� The key challenge for this business
remains lower oil prices and the lack of work being experienced by
a depressed oil and gas sector� Accordingly, the Company elected
to place the assets of the EDA business into care and maintenance
and to reduce overheads� In the near term, it will continue to
explore the current offshore opportunities to sell or engage idle rig
capacity in longer term contracts at higher rates�
AUSDRILL ANNUAL REPORT 2016OPERATING AND FINANCIAL REVIEW 12
G R O U P F I N A N C I A L P O S I T I O N
Capital, funding and liquidity are managed at the corporate level,
with the individual businesses focussed on working capital and
operating cash flow management� The following commentary
on the financial position relates to the Group�
C A SH FLOWS
A summary of the cash flows for the Group is as follows:
$ MILLION
Drilling Services Australia
Contract Mining Services Africa
Equipment Services & Supplies
Other
Proceeds from asset sales
CAPEX net of asset sales
2016
(3.8)
(6.8)
(1.7)
(0.1)
11.4
(1.0)
2015
(6.3)
(14.1)
(7.8)
(0.3)
5.9
(22.6)
$ MILLION
Cash flows from:
operating activities
investing activities
financing activities
Net cash flow for the year
Opening cash
Exchange rate effect on cash
Closing cash
2016
2015
91.0
60.9
(47.8)
104.1
77.9
(0.1)
181.9
117.9
(0.7)
(104.7)
12.5
62.7
2.7
77.9
C A SH FL OWS FROM OPER ATING AC TI V ITIE S
Operating cash flow for the year was $91�0 million, a reduction
on last year’s $117�9 million� Cash settlement of prior period rate
adjustments on the Siguiri contract in Guinea totalling USD16�2
million was received subsequent to year end, in August 2016�
Operating cash flow was further impacted by taxes paid in Africa
in 2016, following Australian tax refunds being received in the
prior year� Further, cash outlays associated with employee
terminations/ redundancies totalled $3�0 million in 2016�
C A SH FL OWS FROM IN V E S TING AC TI V ITIE S
The Group’s business requires significant amounts of capital
expenditure that is often a front-ended investment, given the
contracting nature of its operations� When the Group enters into new
contracts, it may need to acquire new capital equipment, typically
mining equipment which has a useful life of between seven and 10
years� Capital expenditure is also required to maintain such capital
equipment over its useful life� Consequently, during periods of high
or rapid growth in revenues, the capital requirements of the Group
increase� Historically, capital expenditures have been funded by a
combination of operating cash flow, debt and equity�
As a result of the slow-down in the mining industry Ausdrill’s
strategy has been to keep capital expenditure to a minimum�
Capital expenditure totalled $12�4 million for the period, well down
on FY15 of $28�5 million, having been minimised through improving
availability rates and the utilisation of idle capacity� As a result, the
level of capital expenditure is lower than the level of depreciation�
Further, the Group divested certain items of plant and equipment
which were surplus to its operational needs� Proceeds from the sale
of this plant and equipment totalled $11�4 million and resulted in a
profit on sale of $3�7 million�
The following table shows Ausdrill’s acquisitions of property,
plant and equipment and other non-current assets funded from
all sources (excluding intangibles, but including hire purchase
arrangements) by segment for the periods indicated�
The Company routinely engages in drill for equity arrangements
whereby it undertakes drilling works for clients in exchange for
shares or debt instruments convertible into shares� During the
period, the Company invested $3�8 million into drill for equity work
programmes and divested $7�5 million of shares acquired in drill for
equity programmes� A profit on the sale of shares acquired through
these programmes totalled $0�6 million, net of losses/impairment�
In May 2016, Ausdrill announced that it had signed a Sale and
Purchase Agreement to sell the Drilling Tools Australia (“DTA”)
business to Robit Plc, for $66 million� This transaction completed
on 30 June 2016, with $46�2 million in proceeds being received,
with the balance payable by 31 December 2016� Refer to note 13 of
this report for further transaction details�
In January 2016, Ausdrill announced it would exit its DT HiLoad
truck tray manufacturing business in order to facilitate industry
consolidation� The business assets were subsequently sold during
March 2016 and the business has been wound down to closure�
To date, $3�2 million in asset sale proceeds have been received
in relation to the sale of this business� Additional proceeds are
expected to be received through the sale of consignment steel
stocks in future reporting periods, as a condition of the sale�
Refer to note 13 of this report for further transaction details�
Distributions from the AUMS joint venture totalled $8�9 million for
the year�
C A SH FL OWS FROM FIN A NCING AC TI V ITIE S
Net financing cash outflows were $47�8 million in the year ended
30 June 2016, compared to an outflow of $104�7 million in 2015�
The Group’s continued focus on debt reduction has resulted in
$143�1 million of net debt repayments over the last two years�
No dividend payments were made during the year�
WOR K ING C A PITA L
The Group’s working capital comprises current trade and other
receivables, inventories and current trade and other payables�
The following table shows the principal elements of working capital
for the periods indicated�
$ MILLION
Current trade and other receivables
Inventories
Current trade and other payables
Net working capital
Increase/(decrease) in net working capital
2016
169.8
191.4
(82.8)
278.4
(5.7)
2015
141.8
226.9
(84.6)
284.1
(16.3)
AUSDRILL ANNUAL REPORT 2016OPERATING AND FINANCIAL REVIEW
13
The Group’s year end working capital balance has remained
relatively flat� Inventory levels decreased substantially as a
consequence of business sales and the continuing businesses
focus on stock level reduction� Trade receivables have increased
mainly due to the increase in receivable pertaining to the sale of
DTA totalling $19�8 million, to be settled in December 2016 and the
increase in trade receivables associated with the settlement of prior
period rate adjustments for the Siguiri project in Guinea, totalling
USD16�2 million, which was subsequently settled in August 2016�
DI V IDENDS
The level of dividends is primarily based on the earnings, cash
flows and business requirements of the Group� Historically, the
Company has paid dividends to its shareholders twice a year,
in April and October� During the year ended 30 June 2016 the
Company did not pay any dividends�
Having given due consideration to the current operating conditions,
the Board has not declared a final dividend for the financial year
ended 30 June 2016� Subject to continued improvement in
financial performance, the Company expects to be in a position to
resume the payment of dividends in the next financial year�
DEBT, GE A R ING A ND O THER FIN A NCING A R R A NGEMENT S
At 30 June 2016, the Group had total borrowings of $398�5
million (including prepaid borrowing costs and insurance premium
funding)� Cash and cash equivalents totalled $181�9 million,
resulting in net debt of $216�7 million� The Company’s gearing
ratio improved from 39�1% to 26�3%�
The Group has available a $125 million revolving cash advance
facility, of which $123�9 million was undrawn at 30 June 2016�
The facility matures in March 2018 and bears interest at a margin
over the Australian bank bill swap rate for borrowings in Australian
dollars and LIBOR for borrowings in US dollars�
In November 2012, the Group issued unsecured notes to the value
of US$300 million� These notes have a seven year term and have
a fixed interest rate of 6�875% paid semi-annually�
The following table shows net debt and gearing ratios�
$ MILLION
Revolving cash advance facility
Asset finance and other loans
2016
-
0.5
2015
25.0
22.9
US$300 million unsecured notes
402.3
390.7
Insurance premium funding and
prepaid borrowing costs
Total borrowings
Cash and cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
Note: Columns may not add due to rounding
(4.2)
398.5
(181.9)
216.7
606.6
823.3
(4.8)
433.8
(77.9)
355.9
553.3
909.2
26.3%
39.1%
The US$ denominated borrowings of the Group include the
US$300 million unsecured notes� These borrowings are
translated at the year end exchange rate of A$1�00: US$0�7458
and, as a result of the strengthening A$ over the year, an amount of
$11�6 million has been included in the foreign currency translation
reserve in relation to borrowings� This loss is partially offset by
the translation differences arising from the translation of foreign
currency denominated assets in Africa�
The Group’s senior debt facilities contain certain financial
covenants that have been complied with during the year�
Ausdrill’s debt structure provides the necessary liquidity for its
operations and the maturity profile is set out below:
$A MILLION
450.0
400.0
350.0
300.0
250.0
200.0
150.0
100.0
50.0
0
F Y17
F Y18
F Y19
F Y20
ASSET FINANCE AUSTRALIA
REVOLVING CASH ADVANCE FACILITY - UNDRAWN
REVOLVING CASH ADVANCE FACILITY
US$300 MILLION UNSECURED NOTES
BA L A NCE SHEE T
The net assets of the Group increased by $53�3 million to $606�6
million during the year� This increase was substantially impacted
by the profit on sale of DTA which was sold on 30 June 2016�
Cash and cash equivalents increased by $104�1 million and
included $46�2 million of proceeds from the sale of the DTA
business� A further $19�8 million in DTA sale proceeds is
expected to be received by 31 December 2016�
Trade and other receivables increased by $28�0 million or 19�8%
to $169�8 million and includes a once-off back claim relating to the
Siguiri project in Guinea of US$16�2 million, which was received in
August 2016 and also includes $19�8 million relating to balance of
proceeds on sale of the DTA business to Robit plc�
Inventories decreased by $35�5 million or 15�6% to $191�4 million,
partially as a consequence of the sale of the DTA business and
additionally as a direct consequence of a considered effort by the
continuing businesses to reduce stock levels in line with lower
activity levels�
AUSDRILL ANNUAL REPORT 2016OPERATING AND FINANCIAL REVIEW
Our efforts are focussed on obtaining greater efficiency by reducing
duplication and adopting shared services solutions, where possible�
Most employees understand the difficulties faced by various parts
of the Group and have shown support for the efforts to retain the
Group’s competitive advantage and maintain its capability to take
full advantage of new opportunities as they arise� Consequently,
wage negotiations resulted in a reduction in labour costs which
have assisted in delivering a more acceptable level of earnings for
the Group�
6,003
5,703
4,578
4,080
3,841
JUN 12
JUN 13
JUN 14
JUN 15
JUN 16
AUSTRALIA
AFRICA
AUMS JV
14
The net value of Property, Plant and Equipment decreased by
$69�9 million due to depreciation exceeding capital expenditure
and further due to the sale of discontinued businesses and
surplus plant and equipment
Trade and other payables remained relatively flat decreasing
slightly from $84�6 million to $82�8 million�
As a consequence of the strategy to deleverage the business,
the net debt of the Group (debt including prepaid borrowing costs
and insurance premium funding less cash) decreased from $355�9
million at 30 June 2015 to $216�7 million at 30 June 2016�
The gearing ratio has decreased from 39�1% to 26�3%�
Total drawn borrowings (excluding prepaid borrowing costs
and insurance premium funding) of $402�7 million represent
74% of liabilities, decreasing by $35�9 million� Current borrowings
decreased by $21�3 million as the Group continued to amortise
existing hire purchase and finance lease liabilities�
Employee obligations of $34�9 million increased by $3�2 million
and represent 6�4% of liabilities�
Shareholder equity increased to $606�6 million� The translation
of USD denominated debt net of translation of foreign operations
(principally Ausdrill’s African business) had a $4�9 million adverse
effect over the year�
The return on average capital employed has increased to 6�6% for
the year to 30 June 2016 compared to 3�6% in the previous year
and reflects the increased profitability of the continuing operations�
(This is calculated as follows: EBIT from continuing operations
divided by the sum of average receivables, inventory, plant and
equipment, investment in associates, intangibles less payables)�
The financial condition of the Group remains strong with a gearing
ratio (net debt to net debt plus equity) of 26�3%, cash of $181�9
million, and interest cover (EBITDA/Net Cash Interest) of 3�9
times and the net secured debt to EBITDA ratio is negative as cash
exceeded secured debt� The Group’s net tangible asset position
has increased from $1�77 per share to $1�94 per share�
PEOPLE
The Ausdrill Group is fortunate to have a loyal, hard-working
and highly experienced workforce which allows us to consistently
deliver outstanding service to our clients�
The Group’s Australian operations continue to be affected by the
downturn in the resources sector, and this is again reflected in the
reduction in the number of people employed in the Group�
At 30 June 2016, the number of employees within the
Group worldwide, including jointly owned entities, stood
at 3,841 – a decrease of 5�9% from 4,080 at 30 June 2015�
In percentage terms, the impact on Australian operations was
greater than the Group reduction with Australian employee
numbers reducing from 1,388 in July 2015 to 1,148 at 30 June
2016 – a decrease of 17�3%, due to redundancies and natural
attrition, following business rationalisation�
The Group has been able to retain a core of highly experienced,
long serving employees to form the backbone of the Company
and on which it relies to concentrate on remaining efficient and
competitive within a market which continues to experience
challenging conditions�
AUSDRILL ANNUAL REPORT 2016OPERATING AND FINANCIAL REVIEW
15
H E A LT H , S A F E T Y, E N V I R O N M E N T,
Q U A L I T Y A N D T R A I N I N G
Ausdrill’s commitment to the safety and wellbeing of its
employees, contractors and visitors is a core value of the business�
As the Group continues to improve its health and safety
performance, the focus remains on the engagement of people at
all levels to maintain Ausdrill as a safe place to work�
Efforts this year have resulted in a 25% reduction in the number
of incidents over the previous year with an 8% reduction in the
number of hours worked� During this period the Total Recordable
Injury Frequency Rate (TRIFR) has reduced by ~ 45%�
The initial rollout of the One Safe All Safe program was completed
with buy-in from all levels of the workforce and management team�
The program has been enhanced by conducting Health and Safety
Roles and Responsibilities training for managers and supervisors�
This training will continue across the Group during 2016�
The next stage of One Safe All Safe will begin in late 2016 with a
simplification of the material and driving accountability to everyone
under the slogan of “If You See something, Say something,
Do something, Make It Safe”�
A key component of the Group’s improvement strategy is to
“Find people doing things right” and provide them with positive
feedback to encourage future good performance� This process
translates into sharing good practices both within business units
and across the Group by communicating “What Good Looks Like
Here”� This encourages everyone to be proud of what they do well
and provides an opportunity to learn from what others are doing�
As a result of a review of on-line training modules, the induction
and many other modules have been simplified to enhance the
learning opportunity for users�
A program to simplify HSEQT related management plans and risk
assessments has been implemented to ensure these documents
are easier to understand at all levels of the management teams and
workforce whilst maintaining high quality documents�
S TATIS TIC S
The year has seen an improvement in safety performance across
the Group with reductions in Lost Time Injury Frequency Rates and
Total Recordable Injury Frequency rates�
20
15
10
5
0
JUN 13
DEC 13
JUN 14
DEC 14
JUN 15
DEC 15
JUN 16
12 MONTH ROLLING LTIFR
12 MONTH ROLLING TRIFR
AUSDRILL ANNUAL REPORT 2016OPERATING AND FINANCIAL REVIEW
16
G R O U P B U S I N E S S S T R AT E G I E S A N D
P R O S P E C T S F O R F U T U R E Y E A R S
S TR ATEGIES
Ausdrill’s longer term strategy is to further strengthen its market
position in the mining services industry in Australia and Africa by:
Focusing on its core services — Ausdrill plans to continue to
rationalise its businesses so that it can concentrate its efforts on
profitable revenue streams delivering core services in markets
where it has a competitive advantage� Ausdrill’s focus on
innovation, automation and adherence to stringent standards
will help deliver increased client productivity and cost efficiency,
assisting the Group to become the mining services provider of
choice for clients�
Effective marketing of Ausdrill’s client-focused service offering
— Ausdrill plans to refine the marketing of its production-related
service offering to increase the relevance and value of the services
the Group brings to clients and further embed Ausdrill within client
operations� The Group believes that its broad service offering
will contribute to a resilient business, characterised by strong,
defensible market positions in higher margin specialist services�
Maintaining and improving strong safety standards across
Ausdrill’s operations — To ensure the success of the business
and welfare of employees, Ausdrill places priority on safety�
Major mining clients generally require service providers to qualify
to their safety standards before service providers are eligible
to tender for projects� These requirements act as a ‘licence to
operate’ when tendering for major projects� The Group has a
long-standing dedication to implementing and adhering to clients’
safety standards that is recognised by key clients and Ausdrill
will continue to seek ways to maintain and improve the safety
of its service delivery� All staff members are required to undergo
compulsory training so that they can develop the skills and attitude
to ensure workplace health and safety� The Group will continue
to work in partnership with employees and sub-contractors to
improve safety standards�
Supporting existing clients’ growth ambitions into new
geographies where the opportunity meets our internal
requirements — Ausdrill plans to strengthen ties with existing
mining company clients by following them into new geographies
where such opportunities meet internal requirements regarding
financial, safety and reputation considerations� Considerations will
include the geological features of the site, the geopolitical stability
of the area where the mine will be located as well as infrastructure
and environmental concerns� The Group will seek long-term
contracts at mines with production phases that are anticipated to
be long-lived and that will increase earnings visibility and reduce
costs by delaying the need for redeployment of capital and
personnel� Clients will continue to be mining companies that have
a robust business and outlook� The Group has a successful track
record of this strategy in Africa and believes that this strategy is an
effective way to strengthen client relationships and provide
growth opportunities�
Pursue a conservative financial policy — Ausdrill intends to
maintain a prudent and sustainable capital structure that allows
financial and operational flexibility across a range of economic
environments and cycles� The Group believes that prudent risk
management policies are represented by the enhanced gearing
and interest cover ratios� The Group will leverage long-standing
relationships with clients to ensure that working capital and capital
expenditure is deployed in a way that maximises return on capital
while maintaining prudent reserves as necessary�
PROSPEC T S
Ausdrill’s prospects of achieving the stated strategic objectives are
subject to the uncertainties that exist in the broader mining industry
in Australia and globally, many of which are beyond Ausdrill’s
reasonable control�
R ISKS
The following section describes certain factors and trends that
have the potential to have a material adverse impact on the
financial condition and results of operations� Results of operations
are impacted by both global and local factors� These factors may
arise individually, simultaneously or in combination�
The factors identified below are not necessarily listed in order of
importance and are not intended as an exhaustive list of all the risks
and uncertainties associated with Ausdrill’s business� Additional
risks and uncertainties not presently known to management,
or that management currently considers to be immaterial or
manageable, may adversely affect Ausdrill’s business�
LE V EL OF NE W MINING SERV ICE S C ONTR AC T S A ND
C ONTR AC T R ENE WA L S
Mining services provided under contracts represent a large portion
of revenues for services provided for contract mining, drill & blast,
grade control, equipment hire, water well drilling and exploration
services� Under most of the Group’s mining services contracts the
mine operator contracts us to undertake work in accordance with
a work schedule� The Group’s mining services contracts, other
than equipment hire contracts and exploration, are typically for
terms between three and five years� Some contracts, typically
exploration contracts, have a shorter term, generally of one year,
while equipment rental contracts have varying terms from three
months to two years�
Generally, in the mining industry, most contracts can be terminated
for convenience by the client at short notice and without penalty with
the client paying for all work completed to date, unused material
and in most cases demobilisation from the sites and redundancies�
As a result, there can be no assurance that work in hand will be
realised as revenue in any future period� The Group is selective in
the contracts that it enters into to allow for options to extend where
possible to maximise the contract period and the return on capital�
AUSDRILL ANNUAL REPORT 2016OPERATING AND FINANCIAL REVIEW
17
In the year ended 30 June 2016, approximately 84% of mining
services revenues were generated from the provision of mining
services to gold mining companies and approximately 9% to iron
ore mining companies, in each case, for work on producing mines�
Consequently, the Group’s activity levels and results of operations
are dependent on production levels at clients’ mines and mining
remaining economic to continue production at current gold and
iron ore mines� Growth is dependent on mine operators seeking
to expand production at existing mines or bring new mines
into production�
The Group’s clients in the gold and iron ore sector are
predominantly large lower cost producers� In the gold sector,
clients include AngloGold Ashanti, Barrick, Endeavour Mining, Gold
Fields, Oz Minerals, Randgold, and Resolute Mining� In the iron ore
sector, the Group’s largest client is BHP Billiton� Iron ore produced
from BHP mines is amongst the most cost competitive seaborne
iron ore fines in the world on a delivered to China basis�
SC A LE OF OPER ATIONS A ND MI X OF AC TI V ITIE S
The scale of operations and the mix of activities that the Group
undertakes during a period also impacts results of operations�
The mix of activities the Group undertakes for clients during a
period also impacts results of operations due to the differing
margins on business segments� The activity mix depends in part
on client demand for the Group’s existing services as well as the
ability to offer new services that the Group develops or acquires�
O U R E D G E
OUR FOCUS ON INNOVATION
AND AUTOMATION DELIVERS A
FLE XIBLE AND ADAPTABLE SERVICE
OFFERING TO OUR CLIENTS
Consequently, results from operations are affected by the number
of new contracts the Group commences work under during a
period, the number of existing contracts that are renewed during a
period and the number of contracts that expire without renewal or
extension or which are otherwise terminated during a period�
Contracts are at risk of termination or non-renewal due to the
client having no further need for the service such as when the
mine has reached the end of its planned life or the operator ceases
production because changes in the underlying commodity price
or mining costs have rendered continued production from the
mine uneconomic� Contracts are also at risk of termination or
non-renewal as a result of competition if the client seeks to use an
alternative mining services provider to provide the service or if the
client decides to bring the contracted services in-house� The Group
has historically had a strong record of securing contract extensions�
PRODUC TION LE V EL S AT CLIENT S’ MINE S
Mining services provided in relation to the production phase
(including development and rehabilitation work) of a mine represent
a large part of sales revenue� Revenues are associated with and
influenced by long-term decisions of mine owners to continue
producing at their current levels� The Group derives most revenues
from mines which are already in production and the majority
of other services, such as logistics and assaying, complement
production-related services� Under most of the Group’s mining
services contracts, a portion of the revenue is earned through a
variable component, primarily based on a unit of production agreed
in the contract� Consequently, mining services revenues are linked
to the volume of materials moved or drilled and not to the short-
term price of the underlying commodity or short-term fluctuations
in the profitability of the underlying mines� Mines in the production
phase of their life cycle typically generate stable revenues because
production volumes have historically been relatively stable, even
during commodity downturns� A downturn in expenditure in the
mining sector typically impacts existing production projects last,
with areas such as exploration and infrastructure construction
services typically cut first� Consequently, the Group has limited
exposure to the exploration activities market which has been
volatile as the level of activity is generally linked to market
sentiment surrounding the outlook for commodity prices and also
the ability of smaller junior mining companies to fund such activities
from capital which is often raised in the equity markets�
The price of gold in U�S� dollar terms has fallen since the peak
in 2012 which has put production at risk at higher cost mines�
In Australian dollar terms, the gold price is at historical highs�
As the amount of gold produced globally in any single year
constitutes a very small portion of the total potential supply of
gold, variations in current production do not necessarily have a
significant impact on the global supply of gold or on its price�
AUSDRILL ANNUAL REPORT 2016OPERATING AND FINANCIAL REVIEW
18
CUR R ENCY FLUC TUATIONS
INCR E A SED R ISK OF DOING BUSINE S S IN A FR IC A
The Group denominates its consolidated financial statements in
Australian dollars� Broadly speaking, the Australian operations are
Australian dollar denominated and the African operations are U�S�
dollar denominated� The Group is exposed to fluctuations in the
value of the Australian dollar versus other currencies, because the
Group’s consolidated financial results are reported in Australian
dollars� If the Group generates sales or earnings or has assets
and liabilities in other currencies, the translation into Australian
dollars for financial reporting purposes can result in a significant
increase or decrease in the amount of those sales or earnings and
net assets� The Group does not generally hedge translated foreign
currency exchange rate exposure� Fluctuations in foreign currency
exchange rates may also make period to period comparisons of
results of operations difficult� As the operations in Africa grow,
foreign exchange translation risk may change�
The African operations often bid on contracts in U�S� dollars but
a portion may be paid in local currency and is therefore exposed
to transaction risk� If the U�S� dollar strengthens against the local
currency during the term of the contract, the revenue the Group
earns may be affected where rise and fall mechanisms in the
contracts are not perfectly correlated� Where the Group earns
revenue in a local currency it is exposed to exchange rate risk from
time of invoice to the time of converting the local currency back to
U�S� dollars� In addition, the Group purchases capital equipment in
various currencies�
The Group does not generally hedge its normal operating foreign
exchange exposures� However, the Group does sometimes
hedge trade receivables that are generated where products are
exported from Australia and those receivables are denominated in
a currency that is foreign to functional currency� The Group may
also hedge large capital expenditure items acquired in a foreign
currency� In respect of other monetary assets and liabilities held
in currencies other than Australian dollars, the Group ensures that
the net exposure is kept to an acceptable level by matching foreign
denominated financial assets with financial liabilities and vice versa�
The Group does not engage in any speculative trading activities�
L A BOUR C OS T S A ND AVA IL A BILIT Y
Labour represents a significant portion of operating expenses�
In order to compete for work and to service clients, the Group
needs to be able to continue to attract and retain skilled employees�
Consequently, the Group is exposed to increased labour costs in
markets where the demand for labour is strong� Within more stable
labour markets, the Group’s labour costs are typically protected by
rise and fall mechanisms within client contracts, which neutralise
the impact of rising labour costs� In Australia, wage labour costs are
typically governed by agreed enterprise agreements, which set out
agreed wage increases within defined periods of the time (typically
2 – 3 years)�
Ausdrill’s African operations are subject to business risks, including
health risks such as the Ebola outbreak (2014), political instability,
war or civil disturbance, terrorism, abduction, expropriation, import
and export restrictions, exchange controls, inflationary economies,
currency risks, legal and taxation risks, risks related to the restrictions
on repatriation of earnings or proceeds from liquidated assets of
foreign subsidiaries, workforce instability, harsh environmental
conditions and remote locations� New mining projects by Ausdrill’s
clients are increasingly occurring in countries where these risks are
significant, which means an increasing portion of Ausdrill’s business
may be subject to these risks� Ultimately, these risks may cause
Ausdrill to cease doing business in certain high growth markets�
UNINSUR ED R ISKS
Ausdrill’s operations are subject to many hazards inherent in the
mining services industry, including blowouts, cratering, explosions,
fires, loss of hole, damages or lost equipment and damage or
loss from inclement weather or natural disasters� Any of these
hazards could result in personal injury or death, damage to or
destruction of equipment and facilities, suspension of operations,
environmental damage and damage to the property of others�
Additionally, warranty and indemnity provisions in Ausdrill’s
mining services contracts could leave Ausdrill exposed to the
risk and liability associated with the services performed under
such contracts� Ausdrill seeks protection for certain of these risks
through insurance� However, it cannot ensure that such insurance
or any indemnification it may receive from third parties will
adequately protect the Company against liability from all of the
consequences of the hazards described above� The occurrence of
an event not fully insured or indemnified against, or the failure of
a third party or an insurer to meet its indemnification or insurance
obligations, could result in substantial losses� In addition, insurance
may not be available to cover any or all of these risks, or, even if
available, may not be adequate� Insurance premiums or other costs
may rise significantly in the future, so as to make such insurance
prohibitively expensive or uneconomic� In future insurance
renewals, the Company may choose to increase its self-insurance
retentions (and thus assume a greater degree of risk) in order to
reduce costs associated with increased insurance premiums�
Ausdrill’s operations may be subject to delays in obtaining
equipment and supplies and the availability of transportation for the
purpose of mobilising rigs and other equipment, particularly where
rigs or mines are located in remote areas with limited infrastructure
support� In addition, the Company’s operations are subject to
adverse weather conditions, natural disasters and mine accidents
or unscheduled stoppages or closings� If Ausdrill’s operations are
interrupted or suspended for a prolonged period as a result of any
such events, its revenues could be adversely affected�
AUSDRILL ANNUAL REPORT 2016OPERATING AND FINANCIAL REVIEW O U T L O O K 5
The Group has successfully refocussed its strategy on the delivery
of core mining services in markets where it has a competitive
advantage� Its strategy is client-focused and harnesses innovation
and technology to deliver relevant and low cost mining solutions to
our clients� The mining industry continues to experience a period
of uncertainty in relation to future levels of demand and prices
received for commodities� Furthermore, competition for work
remains extremely high in all of the markets in which we operate�
19
In response to these market conditions, Ausdrill will:
• Maintain its strong focus on safety
• Continue to deliver efficiency gains to counter market driven
margin compression
• Rationalise its businesses to focus on profitable revenue streams
• Maintain a stable financial foundation from which to grow the
Company in the future
• Review working capital, particularly inventory levels, to ensure
that it is commensurate with current levels of activity
• Restrict capital expenditure to replacement needs or identified
growth opportunities
Ausdrill is of the view that competitive market conditions and
margin pressure will persist�
The gold price (in Australian dollars) currently favours the
Australian production-related mining industry and provides a
platform for a stable level of activity in the near term� However,
near-term growth opportunities are anticipated to emanate from
Africa in particular, where there is a higher rate of tendering activity�
The outlook for the resources industry is expected to improve
over the medium term in both Australia and Africa where Ausdrill
has a long established presence and local know-how and, as a
consequence, Ausdrill has emerged in a strong position to grow in
its key markets in the years ahead�
NOTES
1� Non-IFRS Financial Information - EBITDA, EBIT and Operating profit are non-IFRS measures which Ausdrill uses in managing its business�
2� “EBITDA” is “Earnings before interest, tax, depreciation and amortisation, and significant items”; and
“EBIT” is “Earnings before interest and tax and significant items”�
3� “Operating profit” is profit /(loss) before significant items�
4� Statutory profit / (loss) is profit / (loss) after tax�
5� Disclaimer:
These materials include forward looking statements concerning projected earnings, revenue, growth, outlook or other matters for the financial year ending
30 June 2017 or beyond� Forward-looking statements can generally be identified by the use of forward-looking words such as “may”, “will”, “expect”, “intend”, “plan”,
“estimate”, “anticipate”, “believe”, “continue”, “objectives”, “outlook”, “guidance” or other similar words and include statements regarding certain plans, strategies and
objectives of management, trends and outlook� These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause
Ausdrill’s actual results, performance and achievements or industry results to differ materially from any future results, performance or achievements, or industry results,
expressed or implied by these forward-looking statements�
Forward-looking statements are based upon management’s good faith assumptions relating to the financial, market, regulatory and other relevant environments that will
exist and affect Ausdrill’s business and operations in the future� Ausdrill cannot give any assurance that the assumptions upon which management based its forward-looking
statements will prove to be correct, or that Ausdrill’s business and operations will not be affected in any substantial manner by other factors not currently foreseeable by
management or beyond its control� Any forward-looking statements contained in these materials speak only as of the date of these materials� Subject to any continuing
obligations under applicable law or any relevant stock exchange listing rules, Ausdrill disclaims any obligation or undertaking to publicly update or revise any forward-looking
statement contained in these materials or to reflect any change in management’s expectations with regard thereto after the date hereof of any change in events, conditions or
circumstances on which any such statement is based� No representation or warranty, express or implied, is given as to the accuracy, completeness, likelihood of achievement
or reasonableness of any forecasts, projections or prospects referred to in these materials�
AUSDRILL ANNUAL REPORT 2016OPERATING AND FINANCIAL REVIEW
20
C O R P O R AT E D I R E C T O R Y
DIR EC TORS
AUDITOR
Terence Edward O’Connor AM QC
Chairman
Ronald George Sayers
Managing Director
Ian Howard Cochrane
Deputy Chairman
Terrence John Strapp
Donald James Argent
Mark Anthony Connelly
Mark Andrew Hine
SECR E TA R IES
Efstratios Vassilios Gregoriadis
Domenic Mark Santini
CHIEF FIN A NCI A L OFFICER
Theresa Mlikota
PR INCIPA L R EGIS TER ED OFFICE IN AUS TR A LI A
6 - 12 Uppsala Place
Canning Vale Western Australia 6155
SH A R E R EGIS TER
Computershare Investor Services Pty Ltd
Level 11, 172 St George’s Terrace
Perth Western Australia 6000
PwC
Level 15, 125 St George’s Terrace
Perth Western Australia 6000
SOLICITORS
Clifford Chance
Level 7, 190 St George’s Terrace
Perth Western Australia 6000
Herbert Smith Freehills
Level 36, 250 St George’s Terrace
Perth Western Australia 6000
BA NK ERS
Commonwealth Bank of Australia
Level 3, 150 St George’s Terrace
Perth Western Australia 6000
S TOCK E XCH A NGE LIS TINGS
Ausdrill Limited shares are listed on the Australian Stock
Exchange�
ASX CODE: ASL
W EBSITE
www�ausdrill�com�au
AUSDRILL ANNUAL REPORT 2016 A U S D R I L L A N N U A L R E P O R T 2 0 1 6
21
F I N A N C I A L R E P O R T
3 0 J U N E 2 0 16
Directors’ report �������������������������������������������������������������������������������������������������22
Auditor’s independence declaration ������������������������������������������������������������38
Corporate governance statement ����������������������������������������������������������������39
Consolidated statement of profit or loss �����������������������������������������������������40
Consolidated statement of comprehensive income �������������������������������41
Consolidated statement of financial position ��������������������������������������������42
Consolidated statement of changes in equity ����������������������������������������� 43
Consolidated statement of cash flows ������������������������������������������������������� 44
Notes to the consolidated financial statements ���������������������������������������45
Directors' declaration �������������������������������������������������������������������������������������112
Independent auditor's report ������������������������������������������������������������������������113
Shareholder Information ������������������������������������������������������������������������������ 123
Financial table ������������������������������������������������������������������������������������������������� 124
These financial statements are consolidated financial statements for the
Group consisting of Ausdrill Limited and its subsidiaries� A list of major
subsidiaries is included in note 14� The financial statements are presented
in the Australian currency�
Ausdrill Limited is a company limited by shares, incorporated and domiciled
in Australia� Its registered office and principal place of business is:
Ausdrill Limited
6 - 12 Uppsala Place
Canning Vale Western Australia 6155
The financial statements were authorised for issue by the directors on
24 August 2016� The directors have the power to amend and reissue the
financial statements�
All press releases, financial report and other information are available at
our Shareholders’ Centre on our website: www�ausdrill�com�au
22
A U S D R I L L A N N U A L R E P O R T 2 0 1 6
Your directors present their report on the consolidated entity (the "Group") consisting of Ausdrill Limited (the "Company") and the entities it
controlled at the end of, or during, the year ended 30 June 2016.
D I R E C T O R S A N D C O M PA N Y S E C R E TA R Y
The following persons were directors of the Company during the whole of the financial year and up to the date of this report:
Terence Edward O'Connor AM QC (Chairman)
Ronald George Sayers (Managing Director)
Terrence John Strapp
Donald James Argent
Mark Anthony Connelly
Mark Andrew Hine
Ian Howard Cochrane was appointed as a director and Deputy Chairman on 23 November 2015 and continues in office at the date of
this report.
The company secretaries of the Company are Efstratios Gregoriadis and Domenic Santini.
Mr Gregoriadis B.A., L.L.B., M.B.A joined the Company in February 2011 in the position of Group General Counsel / Company Secretary. Prior
to joining the Company Mr Gregoriadis held the role of Group General Counsel / Company Secretary at Macmahon Holdings Limited, and has
held various other positions as a lawyer in private legal practice.
Mr Santini is a Certified Practising Accountant who was appointed as Company Secretary in August 2007. He is also the Group Financial
Controller of the Group. During the ten years prior to joining the Group, Mr Santini held various commercial roles with public and private
companies.
D I V I D E N D S - A U S D R I L L L I M I T E D
Dividends paid to members during the financial year were as follows:
No final ordinary dividend for the year ended 30 June 2015 (2014: 2.0 cents) per fully paid share paid.
No interim ordinary dividend for the year ended 30 June 2016 (2015: 1.0 cent) per fully paid share paid.
16
$’000
-
-
-
15
$’000
6,246
3,123
9,369
No dividends have been paid by the Company during the period, nor have the directors recommended that any dividends be paid for the year
ended 30 June 2016.
R E V I E W O F O P E R AT I O N S
Information on the operations and financial position of the Group and its business strategies and prospects is set out in the operating and
financial review on pages 3 to 19 of this annual report.
S I G N I F I C A N T C H A N G E S I N T H E S TAT E O F A F FA I R S
On 30 June 2016, the Company completed the sale of its Drilling Tools Australia Pty Ltd business to the Robit Plc Group. Drilling Tools
Australia Pty Ltd is reported as a discontinued operation in note 13 of this report.
On 17 March 2016, the Company announced it had completed the sale of DT HiLoad (DTHL) to Schlam Engineering (Schlam) which included
the sale of all brands, patents and material fixed assets. Certain steel inventories will be sold to Schlam under a consignment arrangement.
Residual inventories and non-critical business assets were disposed of by way of auction or sale to third parties prior to 30 June 2016.
DTHL is reported as a discontinued operation in note 13 of this report.
E V E N T S S I N C E T H E E N D O F T H E F I N A N C I A L Y E A R
Since 30 June 2016, the Group entered into a sale agreement to sell its Miners Rest Motel business for $2.5 million which is expected to
be completed in September 2016 and remains subject to due diligence. The sale includes the land and buildings and all of the operational
assets of the Miners Rest Motel business. A fair value reduction of $0.9 million was made to the value of the land and buildings and has been
brought to account as at 30 June 2016. See note 7(b). The Group entered into a one year accommodation arrangement as a condition of the
sale.
On 1 August 2016, the Company agreed with Azumah Resources Limited to the redemption and settlement of its $2.0 million converting note
through the payment by Azumah of $1.0 million cash and the issue of 22,727,273 shares at a price of $0.044 each.
DIRECTORS' REPORTAUSDRILL ANNUAL REPORT 2016 A U S D R I L L A N N U A L R E P O R T 2 0 1 6
23
No other matter or circumstance has arisen since 30 June 2016 that has significantly affected the Group's operations, results or state of
affairs, or may do so in future years.
L I K E LY D E V E L O P M E N T S A N D E X P E C T E D R E S U LT S O F O P E R AT I O N S
Additional comments on expected results of certain operations of the Group are included in this annual report in the operating and financial
review on pages 3 to 19.
E N V I R O N M E N TA L R E G U L AT I O N
The Group is not subject to any significant environmental regulations but is committed to reducing the impact of its operations on the
environment. Our clients have obligations under environmental regulations. The Group complies with its contractual obligations in this regard.
I N F O R M AT I O N O N D I R E C T O R S
The following information is current as at the date of this report.
Terence Edward O’Connor AM QC LLB (WA). Non-executive Chairman. Age 78.
Experience and expertise
Mr Terry O’Connor is a retired Barrister. He is a graduate of the University of Western Australia, and was formerly a partner in the legal firm
Stone James Stephen Jaques (now King & Wood Mallesons). Mr O’Connor has been a director of a number of public companies. He was
formerly the Chairman of the Anti-Corruption Commission, the Chancellor of the University of Notre Dame Australia and a Commissioner of
the Australian Football League. Mr O’Connor has held the position of Chairman since 1993.
Other current directorships
Non-executive director of EBM Insurance Brokers Limited since 1990.
Former directorships in last 3 years
None.
Special responsibilities
Chairman of the Board.
Chairman of the Remuneration Committee.
Member of the Audit and Risk Committee.
Interests in shares and options
1,004,285 ordinary shares.
Ronald George Sayers Managing Director. Age 64.
Experience and expertise
Mr Ron Sayers was re-appointed as Managing Director in December 2000. Mr Sayers founded Ausdrill in 1987 and was Managing Director
until May 1997. He was formerly the branch manager of a large mining supply group and has been involved with the mining industry for over
40 years.
Other current directorships
None.
Former directorships in last 3 years
None.
Special responsibilities
Managing Director.
Interests in shares and options
37,296,782 ordinary shares.
DIRECTORS' REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016 24
I N F O R M AT I O N O N D I R E C T O R S (C O N T I N U E D)
Terrence John Strapp CPA, SF Fin., MAICD. Non-executive director. Age 72.
Experience and expertise
Mr Terry Strapp was appointed as a non-executive director on 21 July 2005.
Mr Strapp has extensive experience in banking, finance and corporate risk management and has been actively involved in the mining
industry for over 30 years. He is a Certified Practising Accountant (CPA), a Senior Fellow of the Financial Services Institute of Australasia and
a member of the Australian Institute of Company Directors.
Other current directorships
Non-executive director of GR Engineering Limited from 2011.
Former directorships in last 3 years
None.
Special responsibilities
Chairman of the Audit and Risk Committee.
Interests in shares and options
400,000 ordinary shares.
Mr Mark Anthony Connelly BBus, MAICD. Non-executive director. Age 53.
Experience and expertise
Mr Mark Connelly was appointed as a non-executive director on 25 July 2012.
Mr Connelly has more than 29 years' of experience in the mining industry, and has held senior executive positions with Newmont Mining
Corporation and Inmet Mining Corporation. He is the former Managing Director and Chief Executive Officer of Papillon Resources Limited, a
Mali-based gold developer which merged with B2Gold Corp in 2014.
He was Chief Operating Officer of Endeavour Mining Corporation following its merger with Adamus Resources, where he was Managing
Director and CEO. He has extensive experience in financing, development, construction and operation of mining projects in a variety of
commodities including gold, base metals and other resources in West Africa, Australia, North America and Europe.
Other current directorships
Director and Chairman of Toro Gold Limited since 2014.
Director of Saracen Mineral Holdings Limited since 2015.
Director and Chairman of West African Resources Limited since 2015.
Director and Chairman of Cardinal Resources Limited since 2015.
Director and Chairman of Tiger Resources Limited since 2016.
Former directorships in last 3 years
Managing Director of Papillon Resources Limited from 2012 to 2014.
Director of Manas Resources Limited from 2013 to 2015.
Director of B2Gold Corp from 2014 to 2016.
Special responsibilities
Member of the Audit and Risk Committee.
Member of the Remuneration Committee.
Interests in shares and options
None.
DIRECTORS' REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016 25
I N F O R M AT I O N O N D I R E C T O R S (C O N T I N U E D)
Donald James Argent BCom, CPA, FAICD. Non-executive director. Age 69.
Experience and expertise
Mr Donald Argent was appointed as a non-executive director on 25 July 2012.
Mr Argent was the Director Finance and Administration for the Thiess Group, one of the largest integrated engineering and service providers
in Australia and South East Asia. He joined Thiess Pty Ltd in 1985 following six years' service with Thiess Holdings Ltd in the late 1970's,
and, until he retired in July 2011, played an instrumental part in the growth of Thiess from a family-run business to a leading Australian
construction, mining and services company.
Mr Argent holds a Bachelor of Commerce degree, is a Certified Practising Accountant and a Fellow of the Australian Institute of Company
Directors.
Other current directorships
None.
Former directorships in last 3 years
Non-executive director of Sedgman Limited from 2006 to 2015.
Special responsibilities
None.
Interests in shares and options
40,000 ordinary shares.
Mr Mark Andrew Hine MAICD, MAusIMM. Non-executive director. Age 58.
Experience and expertise
Mr Mark Hine was appointed as a non-executive director on 24 February 2015.
Mr Hine is a mining engineer. He graduated from the Western Australia School of Mines and is a member of the Australian Institute of
Company Directors and the Australian Institute of Mining and Metallurgy. He has extensive mining experience with over 25 years' of senior
management roles in both surface and underground mining operations.
He has held a number of senior positions in the mining industry including Chief Operating Officer at Griffin Mining Ltd, Chief Operating Officer
at Focus Minerals Ltd, Chief Operating Officer at Golden West Resources Ltd, Executive General Manager Mining at Macmahon Contractors
Pty Ltd, Chief Executive officer at Queensland Industrial Minerals Ltd, General Manager at Consolidated Rutile Ltd and General Manager
Pasminco, Broken Hill / Elura Mines.
Other current directorships
None.
Former directorships in last 3 years
None.
Special responsibilities
Member of the Remuneration Committee.
Interests in shares and options
75,000 ordinary shares.
DIRECTORS' REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016 26
I N F O R M AT I O N O N D I R E C T O R S (C O N T I N U E D)
Mr Ian Howard Cochrane BCom, LLB. Non-executive Deputy Chairman. Age 62.
Experience and expertise
Mr Ian Howard Cochrane was appointed as a non-executive director and Deputy Chairman on 23 November 2015.
Mr Cochrane holds degrees in Commerce and Law. He was educated in South Africa and immigrated to Australia in 1986. He practised law,
specialising in mergers and acquisitions, in national law firms Corrs Chambers Westgarth and Mallesons Stephen Jaques until 2006 when
he established (with Mr Michael Lishman) the boutique law firm, Cochrane Lishman, which was eventually acquired by the global law firm
Clifford Chance in early 2011.
Mr Cochrane has had a long association with Ausdrill having provided the legal services when Ausdrill first floated in 1994. He was regularly
voted by his peers as being one of the leading M&A lawyers in Australia and retired from the practise of law in December 2013. He has not
provided legal services to Ausdrill or any other entities since then.
Other current directorships
Non-executive director of Wright Prospecting Pty Ltd from 2015.
Non-executive director of Ardross Estates Pty Ltd from 2014.
Non-executive director and Chairman of VOC Group Limited from 2013.
Non-executive director of Dacian Gold Limited from 2016.
Former directorships in last 3 years
None.
Special responsibilities
Deputy Chairman of the Board.
Interests in shares and options
701,695 ordinary shares.
M E E T I N G S O F D I R E C T O R S
The numbers of meetings of the Company's board of directors and of each board committee held during the year ended 30 June 2016 and
the numbers of meetings attended by each director were:
Terence Edward O'Connor
Ronald George Sayers
Ian Howard Cochrane
Terrence John Strapp
Donald James Argent
Mark Anthony Connelly
Mark Andrew Hine
FULL MEETINGS OF DIRECTORS
A
7
7
4
7
6
7
7
B
7
7
4
7
7
7
7
AUDIT
B
A
2
*
*
4
*
4
*
4
*
*
4
*
4
*
MEETINGS OF COMMITTEES
REMUNER ATION
A
1
*
*
*
*
2
2
B
2
*
*
*
*
2
2
A = Number of meetings attended
B = Number of meetings held during the time the director held office or was a member of the committee during the year
* = Not a member of the relevant committee
DIRECTORS' REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016 27
R E M U N E R AT I O N R E P O R T
The directors present the Ausdrill Limited 2016 remuneration report, outlining key aspects of our remuneration policy and framework, and
remuneration awarded this year.
The report is structured as follows:
(a) Key management personnel (KMP) covered in this report
(b) Remuneration policy and governance
(c) Elements of remuneration
(d) Link between remuneration and performance
(e) Remuneration expenses for executive KMP
(f) Contractual arrangements with executive KMP
(g) Non-executive director arrangements
(h) Additional statutory information
(a) Key management personnel covered in this report
Non-executive and executive directors (see pages 23 to 26 for details about each director)
T E O'Connor
R G Sayers
I H Cochrane (from 23 November 2015) M A Hine
T J Strapp
D J Argent
M A Connelly
Other key management personnel
NAME
A G Broad
J Kavanagh
T Mlikota
R J Coates
D James
M C Crocker
A J McCulloch
J E Martins
POSITION
Chief Operating Officer - Australian Operations (from 1 August 2015)
Chief Operating Officer - African Operations
Chief Financial Officer (from 1 December 2015)
Executive General Manager - Australian Mining Operations (from 6 July 2015)
Executive General Manager - Equipment Services and Supplies (from 1 October 2015)
Group Engineering Manager
Chief Operating Officer - Australian Operations (until 10 July 2015)
Chief Financial Officer (until 4 December 2015)
(b) Remuneration policy and governance
Our Remuneration Committee is made up of independent non-executive directors. The Committee reviews and determines our remuneration
policy and structure annually to ensure it remains aligned to business needs and meets our remuneration principles. From time to time,
the Committee also engages external remuneration consultants to assist with this review. In particular, the Committee aims to ensure that
remuneration practices are:
competitive and reasonable, enabling the Company to attract and retain key talent,
aligned to the Company’s strategic and business objectives and the creation of shareholder value,
transparent and easily understood, and
acceptable to shareholders.
The Remuneration Committee is a committee of the Board. It is primarily responsible for making recommendations to the Board on:
non-executive director fees,
remuneration levels of executive directors and other key management personnel,
the over-arching executive remuneration framework, and
operation of the incentive plans which apply to executive directors and senior executives (the executive team), including key performance
indicators and performance hurdles.
The remuneration framework, its elements and link to performance are covered over the page.
DIRECTORS' REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016
28
R E M U N E R AT I O N R E P O R T (C O N T I N U E D)
(c) Elements of remuneration
The executive pay and reward framework has three components:
base pay and benefits, including superannuation,
short-term performance incentives, and
long-term incentives through participation in the Ausdrill Employee Option Plan.
Base pay and benefits
Executives receive their base pay and benefits structured as a total employment cost package which may be delivered as a combination of
cash and prescribed non-financial benefits at the executive's discretion.
Executives are offered a competitive fixed base pay. The Remuneration Committee obtain relevant comparative information and seek
independent advice to ensure base pay is set to reflect the market for a comparable role. Base pay for executives is reviewed annually and on
promotion to ensure that it is competitive with the market.
There are no guaranteed base pay increases included in any executive's contract.
Executives may elect to receive a fully maintained motor vehicle as a component of their base pay.
Superannuation
Retirement benefits are delivered under the Superannuation Guarantee Legislation.
Short-term performance incentives
Cash bonus
The amount of the cash bonus paid to senior executives and middle level management varies between $75,000 to a maximum of
$150,000, inclusive of superannuation, according to the individual’s position. The cash bonus is at the discretion of the Managing Director and
Remuneration Committee and is dependent on the overall financial performance of the Group. If earnings per share is accretive on a year-on-
year basis, then the cash bonus becomes payable in the following financial year.
It is the Board’s view that, given the varied businesses which comprise the Group and the nature of the Group’s operations, it is most beneficial
to shareholders and to the management concerned to have the STI linked to EPS being accretive. This promotes a high level of co-operation
and cohesiveness amongst the various managers and businesses, encouraging them to maximise the use of services provided by other
group businesses, and striving for improvement within the Group. Historically, the STI has operated effectively in this way within Ausdrill, and
as such, the Board does not believe that any change is necessary nor that it would be of overall benefit to Ausdrill to link the STI to specific
KPIs for individuals.
New executives are eligible to receive the cash bonus, if payable, in the financial year following the commencement of their employment with
the Group. There is no cash bonus payable where an executive's employment terminates prior to the end of the financial year.
Service bonus
The amount of the service bonus payable to all employees, excluding the Managing Director, is $1,000 per year of service plus
superannuation. If earnings per share is accretive on a year-on-year basis, then the service bonus to employees becomes payable in the
following financial year.
The Remuneration Committee and Board retains the right to vary the above incentives in exceptional circumstances. Any variation and the
reasons for it are disclosed.
As a result of the unpredictable and continued challenging market conditions during the year ended 30 June 2016, coupled with the
Company’s focus on reducing overhead costs in line with a lower revenue base, the Remuneration Committee and Board declared that
although EPS was accretive for the year ended 30 June 2016 that no bonuses be paid.
DIRECTORS' REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016
29
R E M U N E R AT I O N R E P O R T (C O N T I N U E D)
(c) Elements of remuneration (continued)
Long-term incentives
The Board completed a review of the LTIP in 2014. The review included benchmarking of Ausdrill’s LTI policy against a “benchmark group”
comprised of sector competitors. The review sought to ensure that the balance between rewarding performance and motivating and
retaining existing senior executives was effective and reflected the Company’s business strategies. Accordingly, the review focused on the
composition and operation of the performance conditions. The following changes were made as a result of the review:
Introduction of an additional performance hurdle, Total Shareholder Return (TSR), so that the exercise of options will be subject to the
achievement of this hurdle relative to a peer group (previously the only hurdle was remaining in the employment of Ausdrill at the end of
the vesting period);
Introduction of a TSR performance vesting scale (previously none); and
Introduction of TSR measures applying to each third of the options granted to each senior executive (previously none).
Participation in the plan is at the Board’s discretion and no individual has a contractual right to participate in the plan or to receive any
guaranteed benefits.
Options will be issued in three (equal) tranches as follows:
Tranche 1 (one third of the options) will become exercisable after the second anniversary of their date of issue;
Tranche 2 (a further one third of the options) will become exercisable after the third anniversary of their date of issue; and
Tranche 3 (the remaining one third of the options) will become exercisable after the fourth anniversary of their date of issue.
Options are granted under the plan for nil consideration. Options are granted for a five year period. Vesting will occur based on the Company’s
ranking within the peer group, as follows:
TSR R ANK
PROPORTION OF OPTIONS THAT VEST
Less than 50% percentile
50th percentile
Between 50th and 75th percentile
At or above 75th percentile
0%
50%
Pro-rata (sliding scale) percentage
100%
The peer group includes the following companies:
Austin Engineering Limited
Brierty Limited
Emeco Holdings Limited
MACA Limited
Monadelphous Group Limited
Boart Longyear Limited
Downer EDI Limited
Imdex Limited
Macmahon Holdings Limited
NRW Holdings Limited
(d) Link between remuneration and performance
The table below sets out summary information about the consolidated entity’s earnings and movements in shareholder wealth for the five
years to June 2016.
Revenue
Operating profit before income tax
Net profit/(loss) after tax
Share price at start of year ($ per share)
Share price at end of year ($ per share)
Basic earnings/(loss) (cents per share)
Diluted earnings/(loss) (cents per share)
* Does not include impairment expense
16
$000
745,531
26,305*
58,150
0.39
0.72
18.6
18.2
15
$000
721,660
2,064*
(175,620)
0.86
0.39
(56.2)
(56.2)
14
$000
827,860
34,430*
(43,859)
0.86
0.86
(13.6)
(13.6)
13
$000
1,131,283
109,503*
90,399
3.42
0.86
29.6
29.0
12
$000
1,062,241
152,487
112,207
3.31
3.42
37.3
37.0
DIRECTORS' REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016
30
R E M U N E R AT I O N R E P O R T (C O N T I N U E D)
(e) Remuneration expenses for executive KMP
The following table shows details of the remuneration expense recognised for the Group's executive key management personnel for the
current and previous financial year measured in accordance with the requirements of the accounting standards.
Amounts of remuneration
Figure 1: Executive remuneration
NAME
YEAR
CASH
SAL ARY
$
FIXED REMUNERATION
VARIABLE REMUNERATION
NON-
MONETARY
BENEFITS
LONG
SERVICE
LEAVE
POST-
EMPLOYMENT
BENEFITS
*CASH
BONUS
OPTIONS
TOTAL
$
$
$
Executive directors
R G Sayers
Other key management
personnel
A G Broad 1
J Kavanagh 2
T Mlikota 3
R J Coates 4
D James 5
M C Crocker
A J McCulloch 6
J E Martins 7
Total executive directors
and other KMP
Total non-executive directors
remuneration
Total KMP
remuneration expense
2016
2015
726,299
810,888
25,000
25,000
5,725
12,123
35,000
35,000
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
437,582
-
577,164
621,052
267,651
-
324,003
-
250,166
-
248,578
248,578
83,101
301,359
168,824
418,021
3,083,368
2,399,898
468,231
423,562
3,551,599
2,823,460
-
-
141,075
127,116
-
-
-
-
-
-
25,000
25,000
685
25,000
-
-
191,760
202,116
-
-
191,760
202,116
200
-
-
-
127
-
153
-
115
-
6,232
2,980
-
7,232
-
10,754
12,552
33,089
-
-
12,552
33,089
24,999
-
-
-
25,427
-
29,998
-
23,766
-
23,615
23,615
908
38,882
17,362
37,802
181,075
135,299
44,482
58,854
225,557
194,153
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
$
792,024
883,011
12,392
-
6,196
-
12,392
-
6,196
-
6,196
-
16,349
17,124
704
25,687
9,166
35,443
69,591
78,254
-
-
69,591
78,254
475,173
-
724,435
748,168
305,597
-
360,350
-
280,243
-
319,774
317,297
85,398
398,160
195,352
502,020
3,538,346
2,848,656
512,713
482,416
4,051,059
3,331,072
1 Mr A G Broad was appointed as Chief Operating Officer - Australian Operations on 1 August 2015.
2 Mr J Kavanagh was paid $43,836 of accrued leave entitlements for the year ended 30 June 2016 and $87,719 of accrued leave entitlements for the year ended
30 June 2015.
3 Ms T Mlikota was appointed as Chief Financial Officer on 1 December 2015.
4 Mr R J Coates was appointed as Executive General Manager - Australian Mining Operations on 6 July 2015.
5 Mr D James was appointed as Executive General Manager - Equipment Services and Supplies on 1 October 2015.
6 Mr A J McCulloch resigned as Chief Operating Officer - Australian Operations on 10 July 2015.
7 Mr J E Martins resigned as Chief Financial Officer on 4 December 2015.
*
There will be no cash and service bonus payable for the year ended 30 June 2016. There was no cash and service bonus paid for the year ended 30 June 2015.
DIRECTORS' REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016
31
R E M U N E R AT I O N R E P O R T (C O N T I N U E D)
(f) Contractual arrangements with executive KMPs
Remuneration and other terms of employment for key management personnel are also formalised in service agreements. Each of these
agreements provide for other benefits including car allowances and participation, when eligible, in the Ausdrill Limited Employee Option Plan.
All key management personnel are employed on standard letters of appointment that provide for annual reviews of base salary and between
4 and 12 weeks of termination by either party unless noted below:
NAME
R G Sayers
Managing Director
TERM OF
AGREEMENT
BASE SAL ARY
INCLUDING
SUPER ANNUATION
Ongoing
761,299
TERMINATION BENEFIT
Contract can be
terminated by either party
with 12 months' notice or
payment in lieu.
A G Broad
Chief Operating Officer Australian Operations
(from 1 August 2015)
J Kavanagh
Chief Operating Officer African Operations
T Mlikota
Chief Financial Officer
(from 1 December 2015)
R J Coates
Executive General Manager - Australian Mining Operations
(from 6 July 2015)
D James
Executive General Manager - Equipment Services & Supplies
(from 1 October 2015)
M C Crocker
Group Engineering Manager
(g) Non-executive director arrangements
Ongoing
Ongoing
477,420
533,333
Ongoing
477,420
Ongoing
340,242
Ongoing
Ongoing
340,242
271,571
n/a
n/a
n/a
n/a
n/a
n/a
On appointment to the Board, all non-executive directors enter into a service agreement with the Company in the form of a letter of
appointment. The letter summarises the Board policies and terms, including remuneration, relevant to the officer or director.
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-
executive directors’ fees and payments are reviewed annually by the Board. The Board ensures non-executive directors’ fees and payments
are appropriate and in line with the market. The Chairman’s fees are determined independently to the fees of non-executive directors based
on comparative roles in the external market.
The current base fees were last reviewed with effect from 1 July 2015. The Chairman and other non-executive directors who chair a
committee receive additional yearly fees.
Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval
by shareholders. Directors agreed to a 10% reduction in fees effective 1 July 2015, in line with austerity measures being taken across the
Group. The maximum pool currently stands at $800,000 per annum and was approved by shareholders at the annual general meeting on
27 November 2009.
THE FOLLOWING FEES HAVE APPLIED:
FROM 1 JULY 2015
Base fees
Chairman
Deputy Chairman
Other non-executive directors
Additional fees
Audit and Risk Committee - Chairman
Remuneration Committee - Chairman
$108,000
$90,000
$72,000
$9,000
$9,000
DIRECTORS' REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016 32
R E M U N E R AT I O N R E P O R T (C O N T I N U E D)
(g) Non-executive director arrangements (continued)
Figure 2: Non-executive director remuneration
NAME
T E O'Connor
I H Cochrane (from 23 November 2015)
W M King (until 28 October 2014)
T J Strapp
D J Argent
M A Connelly
M A Hine (from 24 February 2015)
Total non-executive
director remuneration
(h) Additional statutory information
YEAR
BASE FEE
AUDIT
COMMITTEE
REMUNER ATION
COMMITTEE
SUPER-
ANNUATION
$
$
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
108,000
120,000
54,231
-
-
32,671
72,000
80,000
72,000
63,000
72,000
80,000
72,000
27,891
450,231
403,562
-
-
-
-
-
-
9,000
10,000
-
-
-
-
-
-
9,000
10,000
$
9,000
10,000
-
-
-
-
-
-
-
-
-
-
-
-
9,000
10,000
$
11,115
12,350
5,152
-
-
3,104
7,695
8,550
6,840
24,600
6,840
7,600
6,840
2,650
44,482
58,854
TOTAL
$
128,115
142,350
59,383
-
-
35,775
88,695
98,550
78,840
87,600
78,840
87,600
78,840
30,541
512,713
482,416
(1 ) Relative proportions of fixed vs variable remuneration expense
The following table shows the relative proportions of remuneration that are linked to performance and those that are fixed, based on the
amounts disclosed as statutory remuneration expense in figure 1 on page 30:
Figure 3: Relative proportion of fixed vs variable remuneration expense
FIXED REMUNER ATION
AT RISK - STI
AT RISK - LTI *
NAME
Executive directors
R G Sayers
Other key management personnel of the Group
A G Broad
J Kavanagh
T Mlikota
R J Coates
D James
M C Crocker
A J McCulloch
J E Martins
16 15
%
%
16 15
%
%
16 15
%
%
100
97
99
96
98
98
95
99
95
100
-
100
-
-
-
95
94
93
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3
1
4
2
2
5
1
5
-
-
-
-
-
-
5
6
7
* As the long-term incentives are provided exclusively by way of options and rights, the percentages disclosed also reflect the value of remuneration consisting of
options and rights, based on the value of options and rights expensed during the year.
DIRECTORS' REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016 R E M U N E R AT I O N R E P O R T (C O N T I N U E D)
(h) Additional statutory information (continued)
(2) Performance based remuneration granted and forfeited during the year
Figure 4 shows the value of options that were granted and exercised during the current reporting period..
Figure 4: Performance based remuneration granted and forfeited during the current reporting period.
2016
A G Broad
J Kavanagh
T Milkota
R J Coates
D James
M C Crocker
33
LTI OPTIONS
VALUE
GR ANTED
$
67,333
33,667
67,333
33,667
33,667
26,933
VALUE
EXERCISED
$
-
-
-
-
-
-
(3) Terms and conditions of the share-based payment arrangements
Options
The terms and conditions of each grant of options affecting remuneration in the current or a future reporting period are as follows:
GR ANT DATE
21 July 2011
21 July 2011
21 July 2011
7 October 2013
7 October 2013
7 October 2013
23 December 2015
23 December 2015
23 December 2015
VESTING AND
EXERCISE DATE
EXPIRY DATE
EXERCISE
PRICE
VALUE PER
OPTION AT
GR ANT DATE
TSR
PERFORMANCE
ACHIEVED % VESTED
21 July 2013
21 July 2014
21 July 2015
7 October 2015
7 October 2016
7 October 2017
23 December 2017
23 December 2018
23 December 2019
21 July 2016
21 July 2016
21 July 2016
7 October 2018
7 October 2018
7 October 2018
23 December 2020
23 December 2020
23 December 2020
$3.55
$3.65
$3.85
$1.70
$1.70
$1.70
$0.25
$0.25
$0.25
$0.77
$0.79
$0.79
$0.12
$0.12
$0.12
$0.06
$0.07
$0.07
n/a
n/a
n/a
< 50th percentile
to be determined
to be determined
to be determined
to be determined
to be determined
100%
100%
100%
0%
n/a
n/a
n/a
n/a
n/a
Options granted under the plan carry no dividend or voting rights.
When exercisable, each option is convertible into one ordinary share. Options may not be exercised during the period of four weeks prior to
the release of the half-yearly and annual financial results of the Group to the market.
Details of options over ordinary shares in the Company provided as remuneration to each director of Ausdrill Limited and each of the key
management personnel of the Group are set out below. When exercisable, each option is convertible into one ordinary share of Ausdrill
Limited. Further information on the options is set out in note 19 to the financial statements.
DIRECTORS' REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016 34
R E M U N E R AT I O N R E P O R T (C O N T I N U E D)
(h) Additional statutory information (continued)
(4) Reconciliation of options and ordinary shares held by KMP
Figure 5: Options
The table below shows a reconciliation of options held by each KMP from the beginning to the end of 30 June 2016. All vested options
were exercisable.
2016 BALANCE AT THE START
OF THE YEAR
NAME & GR ANT
DATES
VESTED AND
EXERCISABLE UNVESTED
VESTED
FORFEITED
GR ANTED AS
COMPENSATION
NUMBER
%
EXERCISED
NUMBER
%
BALANCE AT THE END OF
THE YEAR
OTHER
CHANGES
VESTED AND
EXERCISABLE UNVESTED
A G Broad
23 December 2015
23 December 2015
23 December 2015
J Kavanagh
23 December 2015
23 December 2015
23 December 2015
T Mlikota
23 December 2015
23 December 2015
23 December 2015
R J Coates
23 December 2015
23 December 2015
23 December 2015
D James
23 December 2015
23 December 2015
23 December 2015
M C Crocker
7 October 2013
7 October 2013
7 October 2013
23 December 2015
23 December 2015
23 December 2015
A J McCulloch
7 October 2013
7 October 2013
7 October 2013
J E Martins
29 November 2010
29 November 2010
29 November 2010
7 October 2013
7 October 2013
7 October 2013
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,000
100,000
133,334
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
133,333
133,333
133,334
-
-
-
200,000
200,000
200,000
-
-
-
200,000
200,000
200,000
333,333
333,333
333,334
166,666
166,666
166,668
333,333
333,333
333,334
166,666
166,666
166,668
166,666
166,666
166,668
-
-
-
133,333
133,333
133,334
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 200,000 100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 133,333 100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 200,000 100
- 200,000 100
- 200,000 100
- 100,000 100
- 100,000 100
- 133,334 100
- 200,000 100
- 200,000 100
- 200,000 100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
333,333
333,333
333,334
166,666
166,666
166,668
333,333
333,333
333,334
166,666
166,666
166,668
166,666
166,666
166,668
-
133,333
133,334
133,333
133,333
133,334
-
-
-
-
-
-
-
-
-
DIRECTORS' REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016
35
R E M U N E R AT I O N R E P O R T (C O N T I N U E D)
(h) Additional statutory information (continued)
(4) Reconciliation of options and ordinary shares held by KMP (continued)
Figure 6: Shareholdings
2016
NAME
Ordinary shares
T E O'Connor
R G Sayers
T J Strapp
D J Argent
M A Hine
I H Cochrane
A G Broad
T Mlikota
D James
BAL ANCE AT THE
START OF THE YEAR
RECEIVED DURING
THE YEAR ON
THE EXERCISE OF
OPTIONS
RECEIVED ON
VESTING OF RIGHTS
DEFERRED SHARES
OTHER CHANGES
DURING THE YEAR
BAL ANCE AT THE
END OF THE YEAR
1,004,285
36,846,782
400,000
40,000
75,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
450,000
-
-
-
701,695
41,202
3,465
400,000
1,004,285
37,296,782
400,000
40,000
75,000
701,695
41,202
3,465
400,000
None of the shares above are held nominally by the directors or any of the other key management personnel.
(5) Loans to key management personnel
No loans have been made to directors of Ausdrill Limited or related entities. Details of loans made to key management personnel of the Group
are set out below.
NAME
J Kavanagh
BAL ANCE AT THE
START OF THE
PERIOD
$
INTEREST PAID AND
PAYABLE FOR THE
PERIOD
$
INTEREST NOT
CHARGED
$
BAL ANCE AT THE
END OF THE PERIOD
$
HIGHEST
INDEBTEDNESS
DURING THE PERIOD
$
150,000
3,955
-
-
150,000
There are no loans outstanding at the end of the current year. In June 2015, an unsecured loan to a key management personnel of $150,000
was made and was repaid in full in 6 months. Interest is payable on this loan at the rate of 8% per annum.
The amounts shown for interest not charged in the tables above represent the difference between the amount paid and payable for the year
and the amount of interest that would have been charged on an arm’s-length basis.
No write-downs or allowances for doubtful receivables have been recognised in relation to any loans made to key management personnel.
(6) Other transactions with key management personnel
Ausdrill Limited has rented an office building from Mr R G Sayers for the past year. The rental agreement is based on normal commercial
terms and conditions and is reviewed annually.
A director, Mr M A Connelly, was a director of B2Gold Corp and is currently the chairman of West African Resources and Cardinal Resources.
B2Gold Corp., through its subsidiary Songhoi Resources Sarl entered into an exploration drilling contract with an Ausdrill Limited subsidiary,
African Mining Services Mali Sarl. Further B2Gold Corp., through its subsidiary Kiaka Gold Sarl entered into an exploration drilling contract
with an Ausdrill Limited subsidiary, African Mining Services Burkina Faso Sarl.
Cardinal Resources entered into an exploration drilling contract with an Ausdrill Limited subsidiary, African Mining Services Ghana.
West African Resources entered into an exploration drilling contract with an Ausdrill Limited subsidiary, African Mining Services Burkina
Faso Sarl.
All contracts are based on normal commercial terms and conditions and Mr Connelly is not party to any contract negotiations for either party.
A director, Mr I H Cochrane, is a non-executive director of Dacian Gold Limited. Dacian Gold Limited has been provided mineral analysis
services by an Ausdrill Limited subsidiary, MinAnalytical Laboratory Services Pty Ltd. These services have been provided on normal terms
and conditions.
DIRECTORS' REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016 36
R E M U N E R AT I O N R E P O R T (C O N T I N U E D)
(h) Additional statutory information (continued)
(6) Other transactions with key management personnel (continued)
Aggregate amounts of each of the above types of other transactions with key management personnel of Ausdrill Limited:
(i) Amounts recognised as revenue
Exploration drilling services
Mineral analysis services
(ii) Amounts recognised as expense
Rental office buildings
16
$
15
$
1,804,181
6,921
1,811,102
2,338,041
-
2,338,041
358,032
358,032
(iii) Amounts recognised as assets and liabilities
At the end of the reporting period, the following aggregate amounts were recognised in relation
to the above transactions:
Current assets
571,708
416,500
(7) Voting of shareholders at last year’s annual general meeting
In 2015, 98.07% of the votes on the remuneration report were in favour of the report. The Company did not receive any specific feedback at
the AGM on its remuneration practices.
S H A R E S U N D E R O P T I O N
Unissued ordinary shares of Ausdrill Limited under option at the date of this report are as follows:
DATE OPTIONS GR ANTED
EXPIRY DATE
ISSUE PRICE OF SHARES
NUMBER UNDER OPTION
21 July 2011
21 July 2011
21 July 2011
7 October 2013
7 October 2013
23 December 2015
23 December 2015
23 December 2015
21 July 2016
21 July 2016
21 July 2016
7 October 2018
7 October 2018
23 December 2020
23 December 2020
23 December 2020
$3.55
$3.65
$3.85
$1.70
$1.70
$0.25
$0.25
$0.25
66,666
66,667
66,667
2,399,985
2,400,030
3,699,979
3,699,979
3,700,042
16,100,015
No option holder has any right under the options to participate in any other share issue of the Company or any other entity.
Shares issued on the exercise of options
No ordinary shares of Ausdrill Limited were issued during the year ended 30 June 2016 on the exercise of options granted under the Ausdrill
Limited Employee Option Plan. No further shares have been issued since that date.
I N D E M N I F I C AT I O N
Under the Company’s constitution and subject to section 199A of the Corporations Act 2001, the Company indemnifies each of the directors,
each of the company secretaries and every other person who is an officer of the Company and its wholly-owned subsidiaries against:
any liability incurred as an officer of the Company (as the case may be) by that person to any person other than the Company or a related
body corporate of the Company, unless that liability arises out of conduct involving a lack of good faith or is a liability for a pecuniary
penalty order under certain provisions of the Corporations Act 2001; and
costs and expenses incurred in defending civil or criminal proceedings subject to certain conditions.
DIRECTORS' REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016
37
The above indemnity is a continuing indemnity and applies in respect of all acts done by a person while an officer of the Company or its
wholly-owned subsidiaries even though the person is not an officer at the time the claim is made.
The Company has entered into a Deed of Indemnity, Access and Insurance (“Deed”) with each current and former officer of the Company and
its subsidiaries, including each director and company secretary and persons who previously held those roles. Under each Deed, to the extent
permitted by law and to the extent and in the amount that the officer is not indemnified under any other indemnity, including an indemnity
contained in any insurance policy, the Company indemnifies the relevant officer against all liabilities of any kind (including liabilities for legal
expenses) incurred by the officer arising out of:
the discharge of his or her duties as an officer of the Company or a subsidiary of the Company, or as an officer of any corporation in which
the Company holds securities (“Related Corporation”) where the officer is representing the interests of the Company in relation to the
Related Corporation; and
the conduct of the business of the Company or a subsidiary of the Company, or a Related Corporation where the officer is representing
the interests of the Company in relation to that Related Corporation.
No amount has been paid under any of these indemnities during the financial year under review.
I N S U R A N C E O F O F F I C E R S
During the financial year, the Company has paid a premium in respect of insuring the directors and officers of the Company and the Group.
The insurance contract prohibits disclosure of the premium or the nature of liabilities insured against under the policy.
P R O C E E D I N G S O N B E H A L F O F T H E C O M PA N Y
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company
or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or
part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations
Act 2001.
N O N - A U D I T S E R V I C E S
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's expertise and
experience with the Company and/or the Group are important.
Details of the amounts paid or payable to the auditor (PwC) for audit and non-audit services provided during the year are set out in note 20 to
the financial statements.
The Board of directors has considered the position and, in accordance with advice received from the Audit and Risk Committee, is satisfied
that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations
Act 2001. The directors are satisfied that the provision of non-audit services by the auditor did not compromise the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
all non-audit services have been reviewed by the Audit and Risk Committee to ensure they do not impact the impartiality and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.
A U D I T O R ' S I N D E P E N D E N C E D E C L A R AT I O N
The auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 38.
R O U N D I N G O F A M O U N T S
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191, issued by the
Australian Securities and Investments Commission, relating to the 'rounding off' of amounts in this report and the accompanying financial
report. Amounts in this report and the accompanying financial report have been rounded off to the nearest thousand dollars, or in certain
cases, to the nearest dollar.
This report is made in accordance with a resolution of directors.
Ronald George Sayers
Managing Director
Perth
24 August 2016
DIRECTORS' REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016
38
A U S D R I L L A N N U A L R E P O R T 2 0 1 6
A U D I T O R ’ S I N D E P E N D E N C E D E C L A R AT I O N
Auditor’s Independence Declaration
As lead auditor for the audit of Ausdrill Limited for the year ended 30 June 2016, I declare that to the
best of my knowledge and belief, there have been:
1.
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2.
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Ausdrill Limited and the entities it controlled during the period.
Justin Carroll
Partner
PricewaterhouseCoopers
Perth
24 August 2016
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
A U S D R I L L A N N U A L R E P O R T 2 0 1 6
C O R P O R AT E G O V E R N A N C E S TAT E M E N T
39
Ausdrill Limited and the Board are committed to achieving and demonstrating the highest standards of corporate governance.
Ausdrill Limited has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations
(3rd edition) published by the ASX Corporate Governance Council.
The 2016 corporate governance statement is dated as at 30 June 2016 and reflects the corporate governance practices in place
throughout the 2016 financial year. The 2016 corporate governance statement was approved by the Board on 24 August 2016.
A description of the Group's current corporate governance practices is set out in the Group's corporate governance statement which
can be viewed at www.ausdrill.com.au.
V O L U N TA R Y TA X T R A N S PA R E N C Y C O D E
Ausdrill has chosen to provide additional disclosure of tax information as recommended by the Board of Taxation’s Voluntary Tax Transparency
Code (“TTC”). Ausdrill is currently classified as a ‘medium business’ for the purposes of the TTC (i.e. The Company’s aggregated Australian
turnover is between A$100 million and A$500 million) and has chosen to disclose the following tax information in this annual report:
A reconciliation of accounting profit to tax expense and to income tax paid or income tax payable
This information is disclosed in note 5(b) to the Consolidated Financial Statements in this annual report.
Identification of material temporary and non-temporary differences
This information is disclosed in note 5(b), 5(c), 5(d) and 7(c) to the Consolidated Financial Statements in this annual report.
Accounting effective company tax rates for Australian and global operations
This information is disclosed in note 5(e) to the Consolidated Financial Statements in this annual report.
Approach to tax risk management and governance
Ausdrill formally documented a Tax Risk Management and Governance Framework in 2015 (the “TRMGF”), in accordance with its
corporate governance framework (as set out in the FY2016 Corporate Governance Statement -> http://www.ausdrill.com.au/investors/
corporate-governance.html) setting out its approach to tax risk management and governance. In summary, Ausdrill’s approach to tax risk
management and governance is as follows:
1. Take a conservative or low risk approach to tax planning and the assessment and management of tax risk.
2. Ensure that tax risks are considered as a part of the overall commercial assessment of transactions.
3. Comply with all tax compliance obligations in accordance with tax law and in a timely manner.
4. A systematic approach to the identification, documentation, communication and reporting of tax risks must be in place at all times.
5. Ensure that all key tax controls, policies and procedures are documented and adhered to via regular monitoring, testing and
maintenance.
6. Ensure that Ausdrill’s tax affairs are managed by employees with the appropriate tax qualifications, skills and experience.
7. Reputable external tax advisors are to be used by Ausdrill to help manage its tax affairs.
8. Utilise tax technology or software to help manage tax compliance obligations.
9. Maintain open and constructive relationships with all relevant tax authorities.
10. All international related party dealings are to be conducted in accordance with the arm’s length principle in a manner consistent with
Australian taxation law and international taxation norms.
• Additional information regarding international related party dealings
Ausdrill provides support including goods, services and equipment to its overseas operations on an arm’s-length commercial basis. Refer to
note 18 for additional information regarding transactions with related parties.
40
A U S D R I L L A N N U A L R E P O R T 2 0 1 6
C O N S O L I D AT E D S TAT E M E N T O F P R O F I T O R L O S S
Revenue from continuing operations
Other income
Materials expense
Labour costs
Rental and hire expense
Depreciation and amortisation expense
Finance costs
Realised foreign exchange (losses)/gains
Unrealised foreign exchange (losses)/gains
Other expenses from ordinary activities
Impairment of property, plant and equipment
Impairment of available-for-sale financial assets
Share of net profit of joint ventures accounted for using the equity method
Profit/(loss) before income tax
Income tax (expense)/benefit
Profit/(loss) from continuing operations
Profit/(loss) from discontinued operations (attributable to equity holders of the Company)
Profit/(loss) for the year
Profit/(loss) is attributable to:
Equity holders of Ausdrill Limited
Profit/(loss) for the year
NOTES
2
4(a)
4(b)
4(b)
4(b)
4(b)
4(b)
4(b)
14(b)
5
13
Earnings/(loss) per share for profit/(loss) from continuing operations attributable to the
ordinary equity holders of the Company:
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Earnings/(loss) per share for profit/(loss) attributable to the ordinary equity holders of the
Company:
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
21
21
21
21
The above consolidated statement of profit or loss should be read in conjunction with the accompanying notes.
16
$’000
745,531
11,114
(299,120)
(240,761)
(13,994)
(68,009)
(33,696)
(8,427)
(6,123)
(69,284)
-
(1,485)
9,074
24,820
(4,581)
20,239
37,911
58,150
15
$’000
721,660
9,349
(285,507)
(253,217)
(10,696)
(73,598)
(36,959)
3,065
(11,172)
(73,873)
(184,244)
-
13,012
(182,180)
21,866
(160,314)
(15,306)
(175,620)
58,150
58,150
(175,620)
(175,620)
CENTS
CENTS
6.5
6.3
18.6
18.2
(51.3)
(51.3)
(56.2)
(56.2)
A U S D R I L L A N N U A L R E P O R T 2 0 1 6
C O N S O L I D AT E D S TAT E M E N T O F C O M P R E H E N S I V E I N C O M E
41
Profit/(loss) for the year
Other comprehensive income/(loss)
Items that may be reclassified to profit or loss
Exchange (losses)/gains on translation of foreign operations
Items that will not be reclassified to profit or loss
(Loss)/gain on revaluation of land and buildings, net of tax
Gain/(loss) on revaluation of available-for-sale financial assets, net of tax
Other comprehensive (loss)/income for the year, net of tax
Total comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year is attributable to:
Equity holders of Ausdrill Limited
Total comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the period attributable to owners of Ausdrill Limited
arises from:
Continuing operations
Discontinued operations
NOTES
8(b)
8(b)
8(b)
16
$’000
15
$’000
58,150
(175,620)
(4,868)
(19,176)
(1,341)
1,178
(5,031)
5,982
(1,147)
(14,341)
53,119
(189,961)
53,119
53,119
(189,961)
(189,961)
15,208
37,911
53,119
(174,655)
(15,306)
(189,961)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
42
A U S D R I L L A N N U A L R E P O R T 2 0 1 6
C O N S O L I D AT E D S TAT E M E N T O F F I N A N C I A L P O S I T I O N
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Available-for-sale financial assets
Current tax receivables
Total current assets
Non-current assets
Receivables
Joint ventures accounted for using the equity method
Available-for-sale financial assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Employee benefit obligations
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Employee benefit obligations
Total non-current liabilities
Total liabilities
Net assets
EQUIT Y
Contributed equity
Other reserves
Retained earnings
Capital and reserves attributable to owners of Ausdrill Limited
Total equity
NOTES
6(a)
6(b)
7(a)
6(c)
6(b)
14(b)
6(c)
7(b)
7(c)
6(d)
6(e)
7(d)
6(e)
7(c)
7(d)
8(a)
8(b)
8(c)
16
$’000
15
$’000
181,857
169,810
191,374
2,000
4,803
549,844
-
69,764
3,641
489,832
37,300
600,537
77,865
141,784
226,869
-
5,544
452,062
2,609
67,599
7,013
559,719
41,032
677,972
1,150,381
1,130,034
82,839
3,521
3,907
33,814
124,081
395,019
23,584
1,101
419,704
543,785
606,596
84,625
26,422
1,892
30,502
143,441
407,367
24,744
1,189
433,300
576,741
553,293
526,447
(16,028)
96,177
606,596
526,447
(11,181)
38,027
553,293
606,596
553,293
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
A U S D R I L L A N N U A L R E P O R T 2 0 1 6
C O N S O L I D AT E D S TAT E M E N T O F C H A N G E S I N E Q U I T Y
43
ATTRIBUTABLE TO OWNERS OF AUSDRILL LIMITED
Balance at 1 July 2014
(Loss) for the year
Other comprehensive (loss)/income
Total comprehensive (loss)/income for the period
Transactions with owners in their capacity as owners:
Dividends paid
Employee share options - value of employee services
12(b)
8(b)
CONTRIBUTED
EQUIT Y
OTHER
RESERVES
NOTES
$’000
526,447
$’000
2,705
-
(14,341)
(14,341)
-
455
455
RETAINED
EARNINGS
$’000
TOTAL
$’000
223,016
752,168
(175,620)
-
(175,620)
(175,620)
(14,341)
(189,961)
(9,369)
-
(9,369)
(9,369)
455
(8,914)
-
-
-
-
-
-
Balance at 30 June 2015
526,447
(11,181)
38,027
553,293
Profit for the year
Other comprehensive (loss)/income
Total comprehensive (loss)/income for the period
Transactions with owners in their capacity as owners:
Dividends paid
Employee share options - value of employee services
12(b)
8(b)
-
-
-
-
-
-
-
(5,031)
(5,031)
-
184
184
58,150
-
58,150
-
-
-
58,150
(5,031)
53,119
-
184
184
Balance at 30 June 2016
526,447
(16,028)
96,177
606,596
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
44
A U S D R I L L A N N U A L R E P O R T 2 0 1 6
C O N S O L I D AT E D S TAT E M E N T O F C A S H F L O W S
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
Receipts from finance customers
Interest received
Interest and other costs of finance paid
Income taxes (paid)/refunded
Management fee received from joint ventures
Net cash inflow/(outflow) from operating activities
Cash flows from investing activities
Payments for purchase of equity investments
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for available-for-sale financial assets
Proceeds from sale of available-for-sale financial assets
Proceeds from sale of business
Repayment of loans from joint ventures
Payment of development costs
Distributions received from associates
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Proceeds from secured borrowings
Repayment of secured borrowings
Repayment of hire purchase and lease liabilities
Proceeds from unsecured borrowings
Dividends paid to Company's shareholders
Repayment of unsecured borrowings
Return of bank guarantee
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
Non-cash investing and financing activities
16
$’000
791,503
(668,345)
123,158
2,609
1,655
(30,870)
(6,434)
888
91,006
(3)
(12,416)
11,418
(3,849)
7,463
49,369
-
-
8,871
60,853
-
(38,091)
(8,047)
4,340
-
(5,974)
-
(47,772)
104,087
77,865
(95)
181,857
-
15
$’000
830,232
(691,746)
138,486
2,649
1,707
(33,063)
7,141
1,016
117,936
-
(28,494)
5,921
(6,398)
3,819
-
6,683
(113)
17,844
(738)
12,500
(94,100)
(18,459)
6,757
(9,369)
(2,074)
52
(104,693)
12,505
62,695
2,665
77,865
-
NOTES
9(a)
13
12(b)
6(a)
9(b)
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
A U S D R I L L A N N U A L R E P O R T 2 0 1 6
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
45
How numbers are calculated
1
2
3
4
5
6
7
8
9
Risk
10
11
12
Segment information
Revenue
Individually significant items
Other income and expense items
Income tax expense/(benefit)
Financial assets and financial liabilities
Non-financial assets and liabilities
Equity
Cash flow information
Critical accounting estimates and judgements
Financial risk management
Capital management
Group structure
13
14
Discontinued operations
Interests in other entities
Unrecognised items
15
16
17
Contingencies
Commitments
Events occurring after the reporting period
Other information
18
19
20
21
22
23
24
25
Related party transactions
Share-based payments
Remuneration of auditors
Earnings per share
Assets pledged as security
Deed of cross guarantee
Parent entity financial information
Summary of significant accounting policies
46
47
50
51
54
55
56
62
69
71
72
73
73
80
81
82
85
88
89
89
89
90
91
93
95
96
97
98
101
102
46
H O W N U M B E R S A R E C A L C U L AT E D
This section provides additional information about those individual line items in the financial statements that the directors consider most
relevant in the context of the operations of the entity, including:
(a) accounting policies that are relevant for an understanding of the items recognised in the financial statements. These cover situations
where the accounting standards either allow a choice or do not deal with a particular type of transaction
(b) analysis and sub-totals, including segment information
(c)
information about estimates and judgements made in relation to particular items.
1
2
3
4
5
6
7
8
9
Segment information
Revenue
Individually significant items
Other income and expense items
Income tax expense/(benefit)
Financial assets and financial liabilities
Non-financial assets and liabilities
Equity
Cash flow information
47
50
51
54
55
56
62
69
71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 47
1 S E G M E N T I N F O R M AT I O N
(a) Description of segments
Management has determined the operating segments based on the internal reports reviewed by the Board that are used to make
strategic decisions. The Board assesses the performance of the operating segments based on revenue, EBIT, EBITDA and profit or
loss before tax.
The operating segments are identified by the Board based on the nature of the services provided. The Board considers the business
from a geographic perspective, similarity of the services provided and the nature of risks and returns associated with each business.
Reportable segments are:
Drilling Services Australia:
The provision of drilling services and drilling equipment including drilling and blasting, in-pit grade control, exploration drilling and
water well drilling in Australia.
Equipment Services and Supplies:
The provision of mining supplies, products and services including equipment hire, equipment parts and sales throughout the world.
Contract Mining Services Africa:
The provision of mining services including drilling and blasting, in-pit grade control, exploration drilling and earthmoving in Africa.
All Other Segments:
Australian operating segments which do not meet the aggregation criteria for the current segments. This includes the provision of
energy drilling and equipment hire, mineral analysis, property holding services and services to the telecommunications and utility
sector.
Corporate and Finance:
This segment includes Group central functions like treasury, financing and administration.
Intersegment Eliminations:
Represents transactions which are eliminated on consolidation.
Discontinued operations:
This segment includes the discontinued operations of Drilling Tools Australia Pty Ltd and DT HiLoad Pty Ltd. Information about
discontinued businesses can be found in note 13.
Restatement of prior year comparable
The Company undertook an internal reorganisation of its Australian businesses with effect from 1 July 2015.
With effect from that date, part of the previous Mining Services Australia segment has been included under the new segment, Drilling
Services Australia, with the balance being included under Equipment Services & Supplies and All Other segments.
A new Equipment Services and Supplies segment has been established and comprises of the previous Supply and Logistics and part
of the Mining Services Australia segments.
A new Corporate and Finance segment has been established, the components of which were previously included in the All Other
segment.
The new definition has been applied to the full year ended 30 June 2015 as if the changes in structure had been effective from 1 July
2014. This has been done to facilitate comparability over multiple reporting periods.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 48
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49
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
50
1 S E G M E N T I N F O R M AT I O N (C O N T I N U E D)
(c) Other segment information
(i) Segment revenue
Sales between segments are carried out at arm's length and are eliminated on consolidation. The revenue from external parties
reported to the Board is measured in a manner consistent with that in the consolidated income statement.
Segment revenue reconciles to total revenue from continuing operations as follows:
Total segment revenue
Interest revenue
Total revenue from continuing operations (note 2)
2 R E V E N U E
From continuing operations
Sales revenue
Sale of goods
Services
Other revenue
Interest - related parties
Interest - others
(a) Revenue recognition
16
$’000
743,899
1,632
745,531
16
$’000
32,117
711,782
743,899
-
1,632
1,632
745,531
15
$’000
719,832
1,828
721,660
15
$’000
33,509
686,323
719,832
160
1,668
1,828
721,660
Revenue is recognised for the major business activities using the methods outlined below.
(i) Contract services
Sales are recognised monthly on the basis of units of production at agreed contract rates.
(ii) Mining supplies and manufactured goods
Sales are recorded when goods have been despatched to a customer pursuant to a sales order and the associated risks have
passed to the customer.
Other revenue
See note 25(e) for the recognition and measurement of other revenue.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 51
3
I N D I V I D U A L LY S I G N I F I C A N T I T E M S
The Group has identified a number of items which are material due to the significance of their nature and/or amount. These are listed
separately here to provide a better understanding of the financial performance of the Group.
(Gain) on sale of discontinued operation
Impairment of non-current assets
Plant and equipment
Total material items from continuing operations
Impairment of goodwill
(Reversal) of Impairment / impairment of assets
Plant and equipment - Drilling Tools Australia
Total material items from discontinuing operations
Total
(a) Impairment of non-current assets
NOTES
13
3(a)
3(a)
13(a)
16
$’000
(34,709)
-
-
-
(6,133)
(6,133)
(6,133)
15
$’000
-
184,244
184,244
10,314
8,240
8,240
202,798
For the year ended 30 June 2016, the Company assessed whether there were any indicators of impairment. In doing this
management considered the profitability of the Cash Generating Units (CGU’s) against their budgets. Where a business was
performing below its forecast and had high under utilisation of property, plant and equipment, management considered that there
was an impairment indicator and performed an impairment assessment for those CGU’s. This was the case for the Ausdrill
Northwest / Connector and Energy Drilling Australia CGU’s. For these CGU’s, management has made estimates associated with
the recoverable amount of the relevant CGU to determine whether there was any impairment in relation to its carrying value.
Determining a CGU’s recoverable amount was completed via the following methods:
(a) assets are firstly considered individually to determine whether there is any impairment related to specific assets due to factors
such as technical obsolescence, declining market value, physical condition or saleability within a reasonable timeframe;
(b) for certain CGU’s the recoverability of its assets is completed via a fair value less costs of disposal calculation (FVLCD); and
(c) for certain CGU’s the recoverability of its assets is completed via a value in use methodology (VIU).
The recoverable amount of a CGU is calculated as the higher of its FVLCD or its VIU. The Company has sourced an external valuation
where a fair value less costs of disposal has been adopted. In the instances where this has been adopted, the valuation technique and
fair value hierarchy is noted below.
The recoverable amount of a CGU determined by a VIU calculation requires the use of assumptions. Cash flow projections
are calculated using EBITDA, changes in working capital and capital expenditure to get to a “free cash flow” estimate.
These projections are based on actual operating results, a Board approved business plan, and subsequent financial forecasts
prepared by management. Future cash flows are extrapolated by applying conservative growth rates for each segment and terminal
growth rates not exceeding 3%. This methodology is consistently applied in reporting periods.
For the two CGU’s which had impairment triggers at 30 June 2016, a FVLCD methodology was adopted. For the year ended
30 June 2015 some CGU’s were assessed by a FVLCD method and some were via the VIU method and this assessment resulted in
impairment charges being booked in the prior period. Please see the table below for the information on which method was applied to
each CGU and a comparison between 30 June 2016 and 30 June 2015.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
52
3
I N D I V I D U A L LY S I G N I F I C A N T I T E M S (C O N T I N U E D)
(a) Impairment of non-current assets (continued)
Summary of the impairment taken, and method used to assess the impairment
A summary of the Company’s assessment of any indication of impairment, the valuation method used and impairment
expense/(reversal) follows.
CGU
Kalgoorlie & Synegex CGU
Ausdrill Northwest (ANW) CGU
BTP Equipment (BTPE) CGU
Contract Mining Services Africa
(CMSA) CGU
MinAnalytical CGU
Energy Drilling Australia (EDA) CGU
Ausdrill Underground Mining
Services Australia (AUMSA) CGU
Manufacturing CGU
Total
TRIGGER OF
IMPAIRMENT
VALUATION
METHOD USED
IMPAIRMENT
EXPENSE/(REVERSAL)
OF PPE
IMPAIRMENT OF
GOODWILL / OTHER
INTANGIBLE ASSETS
16 15 16 15 16 15 16 15
N
Y
N
N
N
Y
-
-
Y
Y
Y
Y
Y
Y
Y
Y
-
FVLCD
-
-
-
FVLCD
-
-
VIU
VIU
VIU
VIU
FVLCD
FVLCD
FVLCD
VIU
-
-
-
-
-
-
20,160
43,000
36,389
67,000
1,584
13,796
-
(6,133)
(6,133)
869
9,686
192,484
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,314
10,314
Fair Value less Costs of Disposal for FY16
Energy Drilling Australia (EDA) CGU
This CGU is included in the Other operating segment. At 30 June 2016, this CGU had triggers of impairment. To determine
the recoverable amount of this CGU the Company engaged an independent external valuer to undertake a fair market valuation.
The market approach, a Level 2 input in the fair value hierarchy, was employed for this valuation as credible comparisons were on
hand to support this approach. As a result, no impairment charge was made as the valuation supported the carrying value. During
the prior year, this CGU exhibited triggers of impairment and the Company engaged an independent external valuer to undertake
a market valuation (the same as that described above) resulting in this CGU being impaired. During the period 30 June 2015, an
impairment charge to plant and equipment of $13,796,000 was made.
ANW CGU (previously ANW and Connector CGU)
This CGU is included in the DSA operating segment. At 30 June 2016, this CGU had triggers of impairment. To determine the
recoverable amount of this CGU the Company engaged an independent external valuer to undertake a fair market valuation.
The market approach, a Level 2 input in the fair value hierarchy, was employed for this valuation as credible comparisons were on
hand to support this approach. As a result, no impairment charge was made as the valuation supported the carrying value. During
the prior year, this CGU exhibited triggers of impairment and the Company engaged an independent external valuer to undertake
a market valuation (the same as that described above) resulting in this CGU being impaired. During the period 30 June 2015, an
impairment charge to plant and equipment of $43,000,000 was made.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
53
3
I N D I V I D U A L LY S I G N I F I C A N T I T E M S (C O N T I N U E D)
(a) Impairment of non-current assets (continued)
Discontinued operations
Manufacturing CGU
As at 30 June 2016, the operations comprising the Manufacturing CGU were discontinued. Please refer to note 13 for further
information on the discontinued operations.
As a result of the sale of the Drilling Tools Australia Pty Ltd (DTA) business, the Company has reversed $6,133,000 of the previously
taken impairment of property, plant and equipment. The total value realised for the business was $66,000,000 and as this was
greater than the carrying value of DTA, the Company reversed a portion of the $8,200,000 previously taken impairment on DTA’s
property, plant and equipment.
For the year ended 30 June 2015, trading conditions were subdued due to lower demand from the mining industry for capital
goods and demand for drilling consumables were impacted by the lower level of activity in the drill and blast segment. The
Company reassessed the recoverable amount of this CGU’s goodwill and other intangibles. This resulted in an impairment charge of
$20,000,000 which was allocated as follows: $4,711,000 against customer contracts and other intangibles, $5,603,000 against
goodwill and $9,686,000 against plant and equipment. The recoverable amount was $65,500,000.
Key assumptions used for value in use calculations in FY15
For certain CGUs the recoverability of its assets is completed via a VIU methodology. The calculation of VIU for the CGUs is most
sensitive to the following assumptions:
(a) EBITDA/sales margins
(b) Capital expenditure
(c) Discount rates and growth rates used to extrapolate cash flows beyond the forecast period
EBITDA margin
EBITDA margin is based on management’s best estimate of the CGU’s performance, taking into account past performance with
changes where appropriate for expected market conditions and efficiency improvements.
Working capital has been adjusted, in particular inventory levels, to return to and reflect what would be considered a normal
operating level to support the underlying business.
Capital expenditure
Capital expenditure with an emphasis on replacement capital only, has been kept to a minimum as idle machinery will gradually
return to work to sustain the assumed levels of activity. The resulting expenditure has been compared against the annual
depreciation charge to ensure that it is reasonable.
Growth rate estimates and discount rates
Future cash flows are extrapolated by applying conservative growth rates for each segment, terminal rates not exceeding 3% and
appropriate discount rates to the CGU. This methodology is consistently applied in reporting periods.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
54
4 O T H E R I N C O M E A N D E X P E N S E I T E M S
This note provides a breakdown of the items included in “other income” and an analysis of expenses by nature.
(a) Other income
Gain on sale of property, plant and equipment
Insurance proceeds
Management fee received from joint ventures
Gain on sale of available-for-sale financial assets
Other
(b) Breakdown of expenses by nature
Depreciation
Buildings
Plant and equipment
Total depreciation
Amortisation
Customer contracts
Finance costs
Hire purchase interest
Interest paid
Debt restructuring cost
Amortised borrowing cost
Finance cost expensed
Rental expense relating to operating leases
Impairment losses - financial assets
Trade receivables provisions
Impairment of other assets
Plant and equipment
Available-for-sale assets
Net foreign exchange losses
16
$’000
3,666
1,370
888
2,044
3,146
11,114
1,801
66,208
68,009
15
$’000
394
2,059
1,016
2,094
3,786
9,349
1,523
71,974
73,497
-
101
379
30,489
-
2,828
33,696
1,362
31,674
638
3,285
36,959
6,258
5,807
919
4,139
-
1,485
1,485
184,244
-
184,244
14,550
8,107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 55
5
I N C O M E TA X E X P E N S E /( B E N E F I T )
This note provides an analysis of the Group’s income tax expense, shows what amounts are recognised directly in equity and how the tax
expense/(benefit) is affected by non-assessable and non-deductible items. It also explains significant estimates made in relation to the
Group’s tax position.
(a) Income tax expense/(benefit)
Current tax
Deferred tax
Adjustments for current tax of prior periods
Income tax expense/(benefit) is attributable to:
Profit/(loss) from continuing operations
Profit/(loss) from discontinued operations
Aggregate income tax expense
NOTES
Deferred income tax expense/(revenue) included in income tax expense comprises:
Decrease/(increase) in deferred tax assets
Increase/(decrease) in deferred tax liabilities
7(c)(i)
7(c)(ii)
(b) Numerical reconciliation of income tax expense/(benefit) to prima facie tax payable
Profit/(loss) from continuing operations before income tax expense
Profit/(loss) from discontinuing operations before income tax expense
Tax at the Australian tax rate of 30% (2015 - 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Goodwill impairment
Share of net (profit) of joint ventures
Share-based payments
Amortisation of intangibles
Other foreign permanent differences
Other non-deductible items
Difference in overseas tax rates
(Over) provision in prior years
Current year tax losses not recognised
Deferred tax assets not recognised / now recognised
Effect of currency translation on tax base
Deferred tax recognised on undistributed profits for foreign subsidiaries and joint ventures
Income tax expense/(benefit)
16
$’000
8,083
2,170
(911)
9,342
4,581
4,761
9,342
582
1,588
2,170
24,820
42,672
67,492
20,248
-
(2,722)
-
-
(3,737)
(2,281)
11,508
(429)
(911)
10,678
(11,973)
(2,155)
2,624
(2,166)
9,342
15
$’000
4,950
(29,282)
(733)
(25,065)
(21,866)
(3,199)
(25,065)
(9,502)
(19,780)
(29,282)
(182,180)
(18,505)
(200,685)
(60,206)
2,356
(3,903)
136
49
(1,315)
(470)
(63,353)
8,195
(733)
21,771
30,235
(14,196)
(6,984)
38,288
(25,065)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 56
5
I N C O M E TA X E X P E N S E /( B E N E F I T ) (C O N T I N U E D)
16
$’000
15
$’000
NOTES
(c) Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and not recognised in
net profit or loss or other comprehensive income but directly debited or credited to equity:
Deferred tax - credited directly to equity
(d) Unrecognised temporary differences
(i) Temporary differences for which deferred tax assets have not been recognised:
Unused tax losses for which no deferred tax asset has been recognised
Other temporary differences
Unrecognised deferred tax assets relating to the above temporary differences
(ii)
Temporary differences relating to investments in subsidiaries for which
deferred tax liabilities have not been recognised:
Undistributed earnings
Unrecognised deferred tax liabilities relating to the above temporary differences
(402)
(926)
106,888
60,875
167,763
50,329
78,334
100,784
179,118
53,735
95,164
7,417
89,413
6,966
Ausdrill Limited has undistributed earnings of $95,164,000 (2015: $89,413,000) which, if paid out as dividends, would be unfranked
and therefore subject to tax in the hands of the recipient. An assessable temporary difference exists, but no deferred tax liability has been
recognised as the parent entity is able to control the timing of distributions from the subsidiary and is not expected to distribute these
profits in the foreseeable future.
(e) 2016 effective tax rates for Australian and global operations in terms of the Board of Taxation’s Voluntary Tax
Transparency Code
(i) Australian operations
The effective tax rate for the year ended 30 June 2016 is 3% (30 June 2015: 6%). This effective tax rate is lower than the
Australian company tax rate due to the impact of functional currencies, items of income and expenditure which are not
assessable or deductible previously unrecognised capital losses recognised in the current period, the inclusion of equity
accounted profits in profit before tax and not recognising a portion of deferred tax assets. The effective tax rate excluding the
impact of these items is 30.5% (30 June 2015: 30.5%).
(ii) Global operations
The effective tax rate for the year ended 30 June 2016 is 13.6% (30 June 2015: 12.5%). This effective tax rate is lower than the
Australian company tax rate due to the impact of functional currencies, items of income which are not assessable, capital gains
and not recognising a portion of deferred tax assets. The effective tax rate excluding the impact of these items is 29.7% (30 June
2015: 31.1%).
6 F I N A N C I A L A S S E T S A N D F I N A N C I A L L I A B I L I T I E S
This note provides information about the Group’s financial instruments, including:
an overview of all financial instruments held by the Group
specific information about each type of financial instrument
accounting policies
information about determining the fair value of the instruments, including judgements and estimation uncertainty involved.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
57
6 F I N A N C I A L A S S E T S A N D F I N A N C I A L L I A B I L I T I E S (C O N T I N U E D)
The Group holds the following financial instruments:
Financial assets
2016
Cash and cash equivalents
Trade and other receivables*
Available-for-sale financial assets
* Excluding prepayments
2015
Cash and cash equivalents
Trade and other receivables*
Available-for-sale financial assets
* Excluding prepayments
Financial liabilities
2016
Trade and other payables
Borrowings
2015
Trade and other payables
Borrowings
ASSETS AT
FV TOCI
FINANCIAL
ASSETS AT
AMORTISED
COST
NOTES
$’000
$’000
TOTAL
$’000
6(a)
6(b)
6(c)
6(a)
6(b)
6(c)
NOTES
6(d)
6(e)
6(d)
6(e)
-
-
181,857
162,206
181,857
162,206
5,641
5,641
-
-
7,013
7,013
-
5,641
344,063
349,704
77,865
135,319
77,865
135,319
-
7,013
213,184
220,197
LIABILITIES AT
AMORTISED
COST
$’000
TOTAL
$’000
82,839
398,540
82,839
398,540
481,379
481,379
84,625
433,789
518,414
84,625
433,789
518,414
The Group’s exposure to various risks associated with the financial instruments is discussed in note 11. The maximum exposure to
credit risk at the end of the reporting period is the carrying amount of each class of financial assets mentioned above.
(a) Cash and cash equivalents
Current assets
Cash at bank and in hand
16
$’000
15
$’000
181,857
77,865
(i) Reconciliation to cash at the end of the year
The above figures reconcile to the amount of cash shown in the statement of cash flows at the
end of the financial year as follows:
Balance as above
Balances per consolidated statement of cash flows
181,857
181,857
77,865
77,865
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 58
6 F I N A N C I A L A S S E T S A N D F I N A N C I A L L I A B I L I T I E S (C O N T I N U E D)
(b) Trade and other receivables
2016
2015
CURRENT NON-CURRENT
$’000
$’000
TOTAL
$’000
CURRENT NON-CURRENT
$’000
$’000
TOTAL
$’000
Trade receivables
Provision for impairment of receivables
(see note 11(b))
Loans to key management personnel
Other receivables (ii)
Prepayments
134,616
(14,726)
119,890
-
42,316
7,604
169,810
-
-
-
-
-
-
-
134,616
108,882
(14,726)
119,890
-
42,316
7,604
(14,364)
94,518
150
38,042
9,074
169,810
141,784
-
-
-
-
2,609
-
2,609
108,882
(14,364)
94,518
150
40,651
9,074
144,393
Further information relating to loans to related parties and key management personnel is set out in note 18.
(i) Classification as trade and other receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business.
Loans and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. If collection of the amounts is expected in one year or less they are classified as current assets. If not, they are
presented as non-current assets. Trade receivables are generally due for settlement not more than 90 days from the date of
recognition and therefore are all classified as current. The Group’s impairment and other accounting policies for trade and other
receivables are outlined in notes 11(b) and 25(k) respectively.
(ii) Other receivables
This amount includes operating expense rebates, accrued revenue and an amount recoverable from a third party for
damages sustained in a fire. This amount also includes the remaining outstanding amount payable by the Robit Plc Group of
$19,800,000, in relation to the sale of Drilling Tools Australia which is due for settlement by no later than 31 December 2016.
(iii) Foreign exchange and interest rate risk
Information about the Group's exposure to foreign currency risk and interest rate risk in relation to trade and other receivables is
provided in note 11.
(iv) Fair value and credit risk
Due to the short-term nature of these receivables, their carrying amount is assumed to be the same as their fair value. For the
non-current receivables, the fair values are also not significantly different to their carrying amounts.
(v) Impairment and risk exposure
Information about the impairment of trade and other receivables, their credit quality and the Group’s exposure to credit risk,
foreign currency risk and interest rate risk can be found in note 11(a).
(c) Available-for-sale financial assets
Available-for-sale financial assets include the following classes of financial assets:
Current assets
Unlisted securities
Convertible note
Non-current assets
Listed securities
Equity securities
Unlisted securities
Convertible note
16
$’000
15
$’000
2,000
2,000
3,641
-
5,641
-
-
5,013
2,000
7,013
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
59
6 F I N A N C I A L A S S E T S A N D F I N A N C I A L L I A B I L I T I E S (C O N T I N U E D)
(c) Available-for-sale financial assets (continued)
(i) Classification of financial assets as available-for-sale
Investments are designated as available-for-sale financial assets if they do not have fixed maturities and fixed or determinable
payments, and management intends to hold them for the medium to long-term. Financial assets that are not classified into any of the
other categories (FVTPL, loans and receivables or held-to-maturity investments) are also included in the available-for-sale category.
The financial assets are presented as non-current assets unless they mature, or management intends to dispose of them within
12 months of the end of the reporting period.
(ii) Impairment indicators for available-for-sale financial assets
A security is considered to be impaired if there has been a significant or prolonged decline in the fair value below its cost.
See note 25(m) for further details about the Group’s impairment policies for financial assets.
(iii) Amounts recognised in profit or loss and other comprehensive income
During the year, the following gains/(losses) were recognised in profit or loss and other comprehensive income.
Gains/(losses) recognised in other comprehensive income
(iv) Non-current assets pledged as security
Refer to note 22 for information on non-current assets pledged as security by the Group.
(v) Fair value, impairment and risk exposure
16
$’000
1,683
15
$’000
(1,639)
Information about the methods and assumptions used in determining fair value is provided in note 6(f) below. None of the
available-for-sale financial assets are either past due or impaired.
On 1 August 2016, the Company agreed with Azumah Resources Limited to the redemption and settlement of its $2.0 million
converting note through the payment by Azumah of $1.0 million cash and the issue of 22,727,273 shares at a price of $0.044 each.
All available-for-sale financial assets are denominated in Australian and Great British Pound currency. For an analysis of the
sensitivity of available-for-sale financial assets to price and interest rate risk refer to note 11(a).
(d) Trade and other payables
Current liabilities
Trade payables
Other creditors and accruals
16
$’000
48,621
34,218
82,839
15
$’000
46,412
38,213
84,625
Trade payables are unsecured and are usually paid within 45 to 60 days of recognition.
The carrying amounts of trade and other payables are assumed to be the same as their fair values, due to their short-term nature.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 60
6 F I N A N C I A L A S S E T S A N D F I N A N C I A L L I A B I L I T I E S (C O N T I N U E D)
(e) Borrowings
Secured
Bank loans
Prepaid borrowing costs
Hire purchase liabilities
Total secured borrowings
Unsecured
USD notes
Prepaid borrowing costs
Insurance premium funding
Total unsecured borrowings
Total borrowings
2016
2015
CURRENT NON-CURRENT
$’000
$’000
TOTAL
$’000
CURRENT NON-CURRENT
$’000
$’000
TOTAL
$’000
-
-
471
471
-
-
3,050
3,050
3,521
-
-
-
-
-
-
471
471
402,253
(7,234)
-
395,019
402,253
(7,234)
3,050
398,069
14,255
-
7,484
21,739
-
-
4,683
4,683
25,141
(1,500)
1,034
24,675
390,676
(7,984)
-
382,692
39,396
(1,500)
8,518
46,414
390,676
(7,984)
4,683
387,375
395,019
398,540
26,422
407,367
433,789
(i) Secured liabilities and assets pledged as security
At 30 June 2016, the Group had the following facilities that were not drawn at balance date:
Total unutilised facilities - bank loans
Bank loans
16
$’000
15
$’000
123,909
99,581
On 15 December 2014, Ausdrill Limited refinanced its senior bank facilities, and secured a new dual currency $125,000,000
syndicated debt facility. The new debt facility, which matures in March 2018, is financed by a number of leading lending
institutions in the Australian banking market. During the reporting period, a total of $25 million which was drawn under the
syndicated facility was repaid. As at 30 June 2016, this facility remains largely undrawn.
In addition, bank loans include asset financing arrangements with a range of banks and financiers which were secured by the
specific assets financed.
USD notes
On 12 November 2012, Ausdrill completed an offering of US$300 million in aggregate principal amount of 6.875% Guaranteed
Senior Unsecured Notes due 2019 in an offering to qualified institutional buyers in the United States pursuant to Rule 144A under
the United States Securities Act of 1993, and to certain persons outside the United States in offshore transactions in reliance on
Regulation S under the Securities Act.
Hire purchase and lease facilities
Hire purchase facilities are secured by the specific assets financed.
Covenants on financing facilities
The Group’s financing facilities contain undertakings including an obligation to comply at all times with certain financial covenants
which require the Group to operate within certain financing ratio threshold levels as well as ensuring that subsidiaries that contribute
minimum threshold amounts of Group EBITDA and Group Total Tangible Assets are guarantors under various facilities.
All banking covenants have been complied with at reporting date.
Refinancing requirements
Where existing facilities approach maturity, the Group will seek to renegotiate with existing and new financers to extend the
maturity date of those facilities. The Group’s earnings profile, credit rating, state of the economy, conditions in financial markets
and other factors may influence the outcome of those negotiations.
Credit ratings
The Group currently has a credit rating of B1 (Outlook Negative) from Moody's and a credit rating of B+ (Outlook Stable) from
Standard & Poor's. Where a credit rating is reduced or placed on negative watch, customers and suppliers may be less willing to
contract with the Group. Banks and other lending institutions may demand more stringent terms (including increased pricing) on
debt facilities to reflect the higher credit risk profile.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
6 F I N A N C I A L A S S E T S A N D F I N A N C I A L L I A B I L I T I E S (C O N T I N U E D)
(e) Borrowings (continued)
(ii) Hire purchase liabilities
Within one year
Later than one year but not later than two years
Total minimum hire purchase commitments
Future finance charges
Hire purchase liabilities:
Current
Non-current
Total lease liabilities
(iii) Fair value
61
16
$’000
481
-
481
(10)
471
471
-
471
15
$’000
7,752
1,060
8,812
(294)
8,518
7,484
1,034
8,518
For the majority of the borrowings, the fair values are not materially different to their carrying amounts, since the interest payable
on those borrowings is either close to current market rates or the borrowings are of a short-term nature. Material differences are
identified only for the following borrowings:
2016
CARRYING
AMOUNT
FAIR VALUE
$’000
$’000
DISCOUNT
R ATE
%
CARRYING
AMOUNT
$’000
2015
FAIR VALUE
$’000
DISCOUNT
R ATE
%
On-balance sheet
Non-traded
financial liabilities
USD notes
402,253
352,535
10.18
390,676
325,176
11.43
The fair values of non-current borrowings are based on discounted cash flows using the rates disclosed in the table above.
(iv) Risk exposures
Information about the Group's exposure to interest rate and foreign currency changes is provided in note 11.
(f) Recognised fair value measurements
(i) Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are
recognised and measured at fair value in the financial statements. To provide an indication about the reliability of the inputs used
in determining fair value, the Group has classified its financial instruments into the three levels prescribed under the accounting
standards. An explanation of each level follows below.
AT 30 JUNE 2016
Financial assets
Available-for-sale financial assets
Australian listed equity securities
GBP listed equity securities
Total financial assets
AT 30 JUNE 2015
Financial assets
Available-for-sale financial assets
Australian listed equity securities
GBP listed equity securities
Total financial assets
LEVEL 1
$’000
LEVEL 2
$’000
LEVEL 3
$’000
TOTAL
$’000
1,543
2,098
3,641
3,834
1,179
5,013
-
-
-
-
-
-
-
-
-
-
-
-
1,543
2,098
3,641
3,834
1,179
5,013
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 62
6 F I N A N C I A L A S S E T S A N D F I N A N C I A L L I A B I L I T I E S (C O N T I N U E D)
(f) Recognised fair value measurements (continued)
(i) Fair value hierarchy (continued)
The Group’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting
period.
Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and
available-for-sale securities) is based on quoted market prices at the end of the reporting period. The quoted market
price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives)
is determined using valuation techniques which maximise the use of observable market data and rely as little as
possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the
instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
This is the case for unlisted equity securities.
(ii) Valuation techniques used to determine fair values
Specific valuation techniques used to value financial instruments include:
The use of quoted market prices or dealer quotes for similar instruments.
7 N O N - F I N A N C I A L A S S E T S A N D L I A B I L I T I E S
This note provides information about the Group's non-financial assets and liabilities, including:
specific information about each type of non-financial asset and non-financial liability
-
-
-
-
inventories (note 7(a))
property, plant and equipment (note 7(b))
deferred tax balances (note 7(c))
employee benefit obligations (note 7(d))
accounting policies
information about determining the fair value of the assets and liabilities, including judgements and estimation uncertainty involved.
(a) Inventories
Work in progress
Finished goods
Consumables and store items
(i) Assigning costs to inventories
16
$’000
11,951
15,808
163,615
191,374
15
$’000
16,380
28,883
181,606
226,869
The costs of individual items of inventory are determined using weighted average costs. See note 25(l) for the Group’s other
accounting policies for inventories.
(ii) Amounts recognised in profit or loss
Write-downs of inventories to net realisable value amounted to $2,043,588 (2015: nil). These were recognised as an expense
during the year ended 30 June 2016 and included in material expense in the consolidated statement of profit or loss.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
63
TOTAL
$’000
1,299,750
(522,588)
777,162
777,162
36,125
6,911
28,494
(14,060)
(77,057)
(192,484)
(5,372)
-
559,719
7 N O N - F I N A N C I A L A S S E T S A N D L I A B I L I T I E S (C O N T I N U E D)
(b) Property, plant and equipment
L AND AND
BUILDINGS
PL ANT AND
EQUIPMENT
PL ANT AND
EQUIPMENT
UNDER
FINANCE
$’000
$’000
$’000
Non-current
At 1 July 2014
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2015
Opening net book amount
Exchange differences
Revaluation of land and buildings
Additions
Transfers to inventory
Depreciation charge
Impairment loss
Disposals
Transfers between classes and group members
Closing net book amount
At 30 June 2015
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2016
Opening net book amount
Exchange differences
Revaluation of land and buildings
Disposal of subsidiary
Impairment reversal on disposal of subsidiary
Additions
Transfers to inventory
Depreciation charge
Disposals
Transfers between classes and group members
Closing net book amount
At 30 June 2016
Cost
Accumulated depreciation
Net book amount
53,279
(2,593)
50,686
50,686
2,172
6,911
196
-
(1,523)
-
-
1,034
59,476
59,476
-
59,476
59,476
554
(930)
-
-
121
-
(1,801)
-
-
57,420
59,221
(1,801)
57,420
1,015,883
(455,258)
560,625
560,625
14,606
-
23,778
(14,060)
(60,734)
(167,747)
(3,692)
57,162
409,938
230,588
(64,737)
165,851
165,851
19,347
-
4,520
-
(14,800)
(24,737)
(1,680)
(58,196)
90,305
1,064,073
(654,135)
409,938
201,667
(111,362)
90,305
1,325,216
(765,497)
559,719
409,938
6,671
-
(14,094)
4,645
11,375
(2,468)
(57,275)
(7,174)
78,537
430,155
90,305
19
-
-
1,488
920
-
(11,434)
(504)
(78,537)
2,257
559,719
7,244
(930)
(14,094)
6,133
12,416
(2,468)
(70,510)
(7,678)
-
489,832
1,145,675
(715,520)
430,155
4,725
(2,468)
2,257
1,209,621
(719,789)
489,832
(i) Non-current assets pledged as security
Refer to note 22 for information on non-current assets pledged as security by the Group.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 64
7 N O N - F I N A N C I A L A S S E T S A N D L I A B I L I T I E S (C O N T I N U E D)
(b) Property, plant and equipment (continued)
(ii) Carrying amounts that would have been recognised if land and buildings were stated at cost
If freehold land and buildings were stated on the historical cost basis, the amounts would be as follows:
Buildings
Cost
Accumulated depreciation
Net book amount
16
$’000
43,755
(12,464)
31,291
15
$’000
43,639
(10,286)
33,353
(iii) Revaluation, depreciation methods and useful lives
Land is not depreciated. Depreciation on major plant and equipment and components is calculated on machine hours worked
over their estimated useful life. Depreciation on other assets is calculated using the straight-line method to allocate their cost or
revalued amounts, net of their residual values, over their estimated useful lives, as follows:
Buildings
Plant and equipment
5 - 25 years
2 - 10 years
See note 25(n) for the other accounting policies relevant to property, plant and equipment.
(iv) Impairment loss
Refer to note 3 for details.
(v) Significant estimates - valuations of land and buildings
Information about the valuation of land and buildings is provided in note 7(e) below.
Since 30 June 2016, the Group entered into a sale agreement to sell its Miners Rest Motel business for $2.5 million which is
expected to be completed in September 2016 and remains subject to due diligence. The sale includes the land and buildings and
all of the operational assets of the Miners Rest Motel business. A fair value reduction of $0.9 million was made to the value of the
land and buildings and has been brought to account as at 30 June 2016.
(c) Deferred tax balances
(i) Deferred tax assets
The balance comprises temporary differences attributable to:
Employee benefits
Foreign tax credits
Accruals
Provision for obsolete stock
Doubtful debts
Depreciation
Other
Borrowing and business expenses
Unrealised foreign exchange
Current year tax losses recognised
Available-for-sale financial assets
16
$’000
10,988
110
811
2,327
4,696
10,995
29,927
337
2,203
1,088
449
4,077
15
$’000
11,072
110
1,312
-
4,524
14,911
31,929
627
1,235
-
508
2,370
Total deferred tax assets
34,004
34,299
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 65
7 N O N - F I N A N C I A L A S S E T S A N D L I A B I L I T I E S (C O N T I N U E D)
(c) Deferred tax balances (continued)
(i) Deferred tax assets (continued)
Adjustment of deferred tax liabilities pursuant to set-off provisions
Net deferred tax assets
Deferred tax assets expected to be recovered within 12 months
Deferred tax assets expected to be recovered after more than 12 months
NOTES
7(c)(ii)
EMPLOYEE
BENEFITS DEPRECIATION
ACCRUALS
DOUBTFUL
DEBTS
$'000
$'000
$’000
$’000
9,358
1,714
-
11,072
(84)
-
10,988
-
14,911
-
14,911
(3,916)
-
10,995
3,408
(2,096)
-
1,312
(501)
-
811
4,437
87
-
4,524
172
-
4,696
At 1 July 2014
(Charged)/credited to profit or loss
(Charged)/credited directly to equity
At 30 June 2015
(Charged)/credited to profit or loss
(Charged)/credited directly to equity
At 30 June 2016
Significant estimates
16
$’000
3,296
37,300
24,159
9,845
34,004
OTHER
$’000
7,278
(5,114)
316
2,480
3,747
287
6,514
15
$’000
6,733
41,032
20,982
13,317
34,299
TOTAL
$’000
24,481
9,502
316
34,299
(582)
287
34,004
The deferred tax assets include an amount of $1,088,000 which relates to carried forward tax losses of African Mining Services
Mali SARL. The subsidiary, which is not part of the Australian tax consolidated group, has incurred the losses over the last two
financial years. The Group has concluded that the deferred assets will be recoverable using the estimated future taxable income
based on the approved business plans and budgets for the subsidiary. The subsidiary is expected to generate taxable income
from 2017 onwards. The losses can be carried forward indefinitely and have no expiry date.
(ii) Deferred tax liabilities
The balance comprises temporary differences attributable to:
Foreign entities distributable profits
Inventories
Revaluation of land and buildings
NOTES
Other
Receivables
Prepayments
Total deferred tax liabilities
Adjustment of deferred tax liabilities pursuant to set-off provisions
Net deferred tax liabilities
7(c)(i)
Deferred tax liabilities expected to be settled within 12 months
Deferred tax liabilities expected to be settled after more than 12 months
16
$’000
9,743
2,117
7,884
19,744
426
118
544
20,288
3,296
23,584
2,661
17,627
20,288
15
$’000
7,119
3,248
7,195
17,562
325
124
449
18,011
6,733
24,744
3,697
14,314
18,011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 66
7 N O N - F I N A N C I A L A S S E T S A N D L I A B I L I T I E S (C O N T I N U E D)
(c) Deferred tax balances (continued)
(ii) Deferred tax liabilities (continued)
FOREIGN ENTITIES
DISTRIBUTABLE
PROFITS INVENTORIES
REVALUATION
OF LAND &
BUILDINGS DEPRECIATION
$’000
$’000
$’000
$’000
At 1 July 2014
Charged/(credited) - profit or loss
Charged/(credited) - directly to equity
At 30 June 2015
Charged/(credited) - profit or loss
Charged/(credited) - directly to equity
At 30 June 2016
13,646
(6,527)
-
7,119
2,624
-
9,743
2,168
1,080
-
3,248
(1,131)
-
2,117
5,779
174
1,242
7,195
-
689
7,884
9,078
(9,078)
-
-
-
-
-
OTHER
$’000
TOTAL
$’000
5,878
36,549
(5,429)
-
449
95
-
544
(19,780)
1,242
18,011
1,588
689
20,288
(d) Employee benefit obligations
2016
2015
CURRENT NON-CURRENT
$’000
$’000
TOTAL
$’000
CURRENT NON-CURRENT
$’000
$’000
TOTAL
$’000
Leave obligations
33,814
1,101
34,915
30,502
1,189
31,691
The leave obligations cover the Group’s liability for long service leave and annual leave.
The current portion of this liability includes all of the accrued annual leave, the unconditional entitlements to long service leave where
employees have completed the required period of service and also those where employees are entitled to pro-rata payments in certain
circumstances. The entire amount of the current provision of $33,814,000 (2015: $30,502,000) is presented as current, since the
Group does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the
Group does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months.
(e) Recognised fair value measurements
(i) Fair value hierarchy
This note explains the judgements and estimates made in determining the fair values of the non-financial assets that are
recognised and measured at fair value in the financial statements. To provide an indication about the reliability of the inputs used
in determining fair value, the Group has classified its non-financial assets into the three levels prescribed under the accounting
standards. An explanation of each level is provided in note 6(f).
AT 30 JUNE 2016
Assets
Land and buildings
Office buildings
Industrial sites
Total non-financial assets
AT 30 JUNE 2015
Assets
Land and buildings
Office buildings
Industrial sites
Total non-financial assets
LEVEL 1
$’000
LEVEL 2
$’000
LEVEL 3
$’000
TOTAL
$’000
-
-
-
-
-
-
-
-
-
-
-
-
8,048
49,372
57,420
8,048
49,372
57,420
9,383
50,093
59,476
9,383
50,093
59,476
There were no transfers between any levels for recurring fair value measurements during the period.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 67
7 N O N - F I N A N C I A L A S S E T S A N D L I A B I L I T I E S (C O N T I N U E D)
(e) Recognised fair value measurements (continued)
(ii) Valuation techniques used to determine level 3 fair values
The Group obtains independent valuations for its freehold land and buildings (classified within property, plant and equipment) at
least every three years.
At the end of each reporting period, the directors update their assessment of the fair value of each property, taking into account
the most recent independent valuations. The directors determine a property’s value within a range of reasonable fair value
estimates.
The best evidence of fair value is current prices in an active market for similar properties. Where such information is not available
the directors consider information from a variety of sources including:
capitalised income projections based upon a property’s estimated net market income, and a capitalisation rate derived from
an analysis of market evidence.
current prices in an active market for properties of a different nature or recent prices of similar properties in less active
markets, adjusted to reflect those differences
(iii) Fair value measurements using significant unobservable inputs (level 3)
The following table presents the changes in level 3 items for the periods ended 30 June 2016 and 30 June 2015 for recurring
fair value measurements:
Opening balance 1 July 2014
Acquisitions
Depreciation and impairment
Revaluation
Transfer in
Gains recognised in other comprehensive income
Closing balance 30 June 2015
Acquisitions
Depreciation and impairment
Revaluation
Gains recognised in other comprehensive income
Closing balance 30 June 2016
OFFICE
BUILDINGS
INDUSTRIAL
SITES
$’000
$’000
5,130
20
(400)
3,495
-
1,138
9,383
93
(892)
-
(536)
8,048
45,556
176
(1,123)
3,416
1,034
1,034
50,093
28
(909)
(930)
1,090
49,372
TOTAL
$’000
50,686
196
(1,523)
6,911
1,034
2,172
59,476
121
(1,801)
(930)
554
57,420
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
68
7 N O N - F I N A N C I A L A S S E T S A N D L I A B I L I T I E S (C O N T I N U E D)
(e) Recognised fair value measurements (continued)
(iv) Valuation inputs and relationships to fair value
The following table summarises the quantitative information about the significant unobservable inputs used in level 3
fair value measurements.
FAIR VALUE AT
30 JUNE
2016
$’000
30 JUNE
2015
$’000
39,624
41,415
DESCRIPTION
Industrial Sites
-Australia
Industrial Sites
-Ghana
8,603
8,678
Office Sites
-Ghana
9,194
9,383
R ANGE OF INPUTS
(PROBABILIT Y-WEIGHTED
AVER AGE)
VALUATION
TECHNIQUE
UNOBSERVABLE
INPUTS*
2016
2015
Income
capitalisation
Capitalisation
rate
7.75-17.5%
(8.99%)
7.75-17.5%
(8.99%)
Market rental
value per (m2)
$35-81 per
m2 ($53)
$33-81 per
m2 ($53)
REL ATIONSHIP OF
UNOBSERVABLE
INPUTS TO FAIR VALUE
The higher the
capitalisation rate, the
lower the fair value
The higher the market
rate, the higher the fair
value
Direct
comparison
m2
Selection of
industrial sites
with similar
approximate
utility
Direct
comparison
m2
Selection of
industrial sites
with similar
approximate utility
$37-1,158
per m2
($339)
$37-1,158
per m2
($339)
The higher the rate
per square metre, the
higher the fair value
$2,256 per
m2 ($2,256)
$2,256 per
m2 ($2,256)
The higher the rate
per square metre , the
higher the fair value
* There were no significant inter-relationships between unobservable inputs that materially affect fair values.
(v) Valuation processes
The Group engages external, independent and qualified valuers to determine the fair value of the Group’s land and buildings
every three years. As at 30 June 2015, the fair values of the industrial sites properties have been determined by members of the
Australian Property Institute, and the Ghana Institute of Surveyors.
The main level 3 inputs used by the Group are derived and evaluated as follows:
Industrial sites - discount rates, terminal yields, expected vacancy rates and values per square metre are estimated by
members of the Australian Property Institute, and the Ghana Institute of Surveyors based on comparable transactions and
industry data.
Historical cost for recently completed buildings
A fair value reduction of $0.9 million was made to the carrying value of the land and building following the entering into of a sale
agreement for the sale of the Miners Rest Motel business.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
69
8 E Q U I T Y
(a) Contributed equity
16
SHARES
15
SHARES
16
$’000
15
$’000
Fully paid ordinary shares
312,277,224
312,277,224
526,447
526,447
(ii) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the
number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a
poll each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
(iii) Dividend reinvestment plan
The Company has a dividend reinvestment plan under which holders of ordinary shares may elect to have all or part of their
dividend entitlements satisfied by the issue of new ordinary shares rather than by being paid in cash. The Board has determined
that the dividend reinvestment plan will be suspended until further notice and that all dividends, if any, be paid in cash.
(iv) Options
Information relating to the Ausdrill Limited Employee Option Plan, including details of options issued, exercised and lapsed
during the financial year and options outstanding at the end of the financial year, is set out in note 19.
(b) Other reserves
The following table shows a breakdown of the balance sheet line item ‘other reserves’ and the movements in these reserves during
the year. A description of the nature and purpose of each reserve is provided below.
REVALUATION
SURPLUS
AVAIL ABLE-
FOR-SALE
FINANCIAL
ASSETS
SHARE-
BASED
PAYMENTS
TRANSACTIONS
WITH
NCI
FOREIGN
CURRENCY
TR ANSLATION
NOTES
$’000
$’000
$’000
$’000
$’000
Balance at 1 July 2014
Revaluation - gross
Deferred tax
Currency translation differences
Other comprehensive income
Transactions with owners in their
capacity as owners
7(b), 6(c)
7(c)
Share-based payment expense
19
At 30 June 2015
Balance at 1 July 2015
Revaluation - gross
Deferred tax
Currency translation differences
Other comprehensive income
Transactions with owners in their
capacity as owners
7(b), 6(c)
7(c)
Share-based payment expense
19
At 30 June 2016
15,298
6,911
(1,395)
466
5,982
-
21,280
21,280
(923)
(418)
-
(1,341)
-
19,939
(38)
(1,639)
492
-
(1,147)
-
(1,185)
(1,185)
1,683
(505)
-
1,178
-
(7)
5,330
-
-
-
-
455
5,785
5,785
-
-
-
-
184
5,969
(2,664)
-
-
-
-
(15,221)
-
-
(19,176)
(19,176)
TOTAL
$’000
2,705
5,272
(903)
(18,710)
(14,341)
-
(2,664)
-
(34,397)
455
(11,181)
(2,664)
-
-
-
-
(34,397)
-
-
(4,868)
(4,868)
(11,181)
760
(923)
(4,868)
(5,031)
-
(2,664)
-
(39,265)
184
(16,028)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 70
8 E Q U I T Y (C O N T I N U E D)
(b) Other reserves (continued)
(i) Nature and purpose of other reserves
Revaluation surplus - property, plant and equipment
The property, plant and equipment revaluation surplus is used to record increments and decrements on the revaluation of
non-current assets. In the event of a sale of an asset, any balance in the reserve in relation to the asset is transferred to retained
earnings. See accounting policy note 25(n) for details.
Available-for-sale financial assets
Changes in the fair value and exchange differences arising on translation of investments that are classified as available-for-sale
financial assets (e.g. equities), are recognised in other comprehensive income and accumulated in a separate reserve within
equity. Amounts are reclassified to profit or loss when the associated assets are sold or impaired, see accounting policy note
25(m) for details.
Share-based payments reserve
The share-based payments reserve is used to recognise the fair value of options issued to employees that are expensed in the
statement of comprehensive income each year.
Foreign currency translation
Exchange differences arising on translation of the foreign controlled entities are recognised in other comprehensive income and
accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment
is disposed of.
The Group’s share of exchange differences arising on translation of foreign joint ventures are recognised in other comprehensive
income and are accumulated in this reserve.
Transactions with non-controlling interests (NCI)
This reserve is used to record the differences described in note 25(b)(iv) which may arise as a result of transactions with non-
controlling interests that do not result in a loss of control.
(c) Retained earnings
Movements in retained profits were as follows:
Balance 1 July
Net profit/(loss) for the year
Dividends
Balance 30 June
NOTES
12(b)
16
$’000
38,027
58,150
-
96,177
15
$’000
223,016
(175,620)
(9,369)
38,027
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
9 C A S H F L O W I N F O R M AT I O N
(a) Reconciliation of profit or loss after income tax to net cash inflow from operating activities
Profit/(loss) for the year
Depreciation and amortisation expense
Impairment of goodwill and other intangibles
Impairment (reversal)/charge of property, plant and equipment
Impairment of available-for-sale assets
(Gain) on sale of non-current assets
Net (gain) on sale of businesses
(Gain) on sale of available-for-sale financial assets
Net exchange differences
Bad debts and provision for doubtful debts
Share of (profits) of joint ventures
Non-cash employee benefits expense - shared based payments
Interest receivable
Change in operating assets and liabilities:
(Increase)/decrease in trade debtors
Decrease in inventories
Decrease/(increase) in deferred tax assets
Decrease in other operating assets
Increase in trade creditors
Increase in provision for income taxes payable
(Decrease) in deferred tax liabilities
Increase in other provisions
Net cash inflow from operating activities
(b) Non-cash investing and financing activities
Acquisition of plant and equipment by means of finance leases or hire purchases
Issue of shares under company dividend reinvestment plan
71
16
$’000
15
$’000
58,150
(175,620)
70,510
-
(6,133)
1,485
(3,740)
(35,344)
(2,044)
(5,015)
919
(9,074)
184
-
(21,373)
13,509
3,645
4,414
20,500
3,545
(4,281)
1,149
91,006
-
-
-
77,463
10,314
192,484
-
(550)
-
(2,094)
(2,102)
4,139
(13,012)
455
(160)
18,603
15,832
(14,325)
2,111
7,356
16,086
(19,685)
641
117,936
-
-
-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 72
R I S K
This section of the notes discusses the group’s exposure to various risks and shows how these could affect the group’s financial position
and performance.
10 Critical accounting estimates and judgements
11
12 Capital management
Financial risk management
73
73
80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 73
1 0 C R I T I C A L A C C O U N T I N G E S T I M AT E S A N D J U D G E M E N T S
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results.
Management also needs to exercise judgement in applying the Group’s accounting policies.
This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more
likely to be materially adjusted due to estimates and assumptions turning out to be incorrect. Detailed information about each of these
estimates and judgements is included in notes 1 to 10 together with information about the basis of calculation for each affected line item in
the financial statements. In addition, this note also explains where there have been actual adjustments this year as a result of an error and
of changes to previous estimates.
(a) Significant estimates and judgements
Recognition of revenue - note 2
Impairment of available-for-sale financial assets - note 6(c)
Estimated fair value of certain available-for-sale financial assets - note 6(c)
Estimation of fair values of land and buildings - note 7(b)
Estimation of useful life of property, plant and equipment - note 7(b)
Recognition of deferred tax asset for carried forward tax losses - note 7(c)
Consolidation decisions and classification of joint arrangements - note 14
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations
of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.
(b) Critical judgements in applying accounting policies
There have been no critical judgements used in preparing the Group’s financial statements for the year ended 30 June 2016.
1 1 F I N A N C I A L R I S K M A N A G E M E N T
This note explains the Group’s exposure to financial risks and how these risks could affect the Group’s future financial performance.
Current year profit and loss information has been included where relevant to add further context.
RISK
EXPOSURE ARISING FROM
MEASUREMENT
MANAGEMENT
Market risk -
foreign exchange
Future commercial transactions
Recognised financial assets and liabilities not
denominated in AUD
Cash flow forecasting
Sensitivity analysis
Forward foreign exchange
contracts
Market risk -
interest rate
Market risk -
security prices
Credit risk
Long-term borrowings at variable rates
Sensitivity analysis
Interest rate swaps
Investments in equity securities
Sensitivity analysis
Portfolio diversification
Cash and cash equivalents, trade receivables,
derivative financial instruments and
available-for-sale debt instruments
Aging analysis
Credit rating
Credit limits, retention of title
over goods sold, letters of
credits
Borrowings and
other liabilities
Borrowings and other liabilities
Rolling cash flow forecasts Availability of committed
credit lines and borrowing
facilities
The Group’s key management personnel report to the Audit and Risk Committee and Board regularly on the progress and objectives
of the risks and the associated corporate governance policy objectives.
The Group’s financial risk management is carried out by a central treasury department (Group treasury) under policies approved by
the Board of directors. Group treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating
units. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign
exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and
investment of excess liquidity.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
74
1 1 F I N A N C I A L R I S K M A N A G E M E N T (C O N T I N U E D)
(a) Market risk
The Group hedges large capital expenditure items acquired in foreign currency. There are no hedges currently in place.
In respect of other monetary assets and liabilities held in currencies other than the AUD, the Group ensures that the net exposure is
kept to an acceptable level by matching foreign denominated financial assets with matching financial liabilities and vice versa.
(i) Foreign exchange risk
Exposure
The Group's exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollars, was as follows:
USD
$’000
GHS
$’000
GBP
$’000
EUR
$’000
TZS
$’000
ZMW
$’000
ZAR
$’000
CAD
$’000
CFA
$’000
PGK
$’000
30 JUNE 2016
Cash
Trade receivables
Available-for-sale
financial assets
Trade payables
Borrowings
2,611
30,081
982
-
-
-
13,242
21,408
396
-
-
(34,144)
(21,453)
-
(4,580)
-
2,103
(25)
-
(2,926)
- (19,696)
-
-
-
5
-
-
-
-
-
1,232
-
-
-
-
-
-
-
-
-
-
-
(3,553)
-
-
-
-
-
-
USD
$’000
GHS
$’000
GBP
$’000
EUR
$’000
TZS
$’000
ZMW
$’000
ZAR
$’000
CAD
$’000
CFA
$’000
PGK
$’000
30 JUNE 2015
Cash
Trade receivables
Available-for-sale
financial assets
Trade payables
Borrowings
2,597
27,202
517
-
1
-
11,952
35,996
-
(57,269)
(49,442)
-
(3,327)
-
1,523
-
-
-
(1,425)
(35,125)
2
-
-
(4)
-
13
24
-
-
-
-
1,699
-
(43)
-
-
65
-
(1)
-
-
-
-
(1,408)
(33)
-
-
-
(33)
-
Amounts recognised in profit or loss and other comprehensive income
During the year, the following foreign exchange related amounts were recognised in
profit or loss and other comprehensive income:
Amounts recognised in profit or loss
Net foreign exchange (loss)/gain included in other income/other expenses
Total net foreign exchange (losses)/gains recognised in profit or loss before
income tax for the period
Net gain/(loss) recognised in other comprehensive income (note 8(b))
Translation of foreign currency denominated operations
16
$’000
(14,550)
(14,550)
15
$’000
(8,107)
(8,107)
(4,868)
(19,176)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
75
1 1 F I N A N C I A L R I S K M A N A G E M E N T (C O N T I N U E D)
(a) Market risk (continued)
(i) Foreign exchange risk (continued)
Sensitivity analysis
A 10 percent strengthening of the Australian dollar against the following currencies at 30 June would have increased
(decreased) equity and pre-tax profit or loss by the amounts shown below. This analysis assumes that all other variables, in
particular interest rates, remain constant. The analysis is performed on the same basis for 2015.
30 June 2016
USD
GHS
GBP
EUR
TZS
ZMW
ZAR
CAD
CFA
PGK
30 June 2015
USD
GHS
GBP
EUR
TZS
ZMW
ZAR
CAD
CFA
PGK
PROFIT OR
(LOSS)
A$’000
1,912
323
(189)
(131)
(72)
(1)
(113)
-
323
-
2,052
3,139
255
(139)
(2,696)
-
1,320
(168)
(6)
131
3
1,839
A 10 percent weakening of the Australian dollar against the above currencies at 30 June would have had the equal but opposite
effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. The Group’s
exposure to other foreign exchange movements is not material.
(ii) Cash flow and fair value interest rate risk
The Group’s fixed rate borrowings and receivables are carried at amortised cost. They are therefore not subject to interest rate
risk as defined in AASB 7, since neither the carrying amount nor the future cash flows will fluctuate because of a change in
market interest rates.
The Group’s main interest rate risks arise from cash, cash equivalents and long-term borrowings. Cash, cash equivalents and
borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose
the Group to fair value interest rate risk. During 2016 and 2015, the Group’s borrowings subject to variable interest rates were
denominated in Australian Dollars.
Refer to note 11(c) Liquidity risk for cash, cash equivalents and variable rate exposure.
As at the end of the reporting period, the Group had no variable interest rate borrowings.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
76
1 1 F I N A N C I A L R I S K M A N A G E M E N T (C O N T I N U E D)
(a) Market risk (continued)
(iii) Price risk
Exposure
The Group's exposure to equity securities price risk arises from investments held by the Group and classified in the balance sheet
as available-for-sale.
The majority of the Group’s equity securities are publicly traded on the Australian Securities Exchange Index and the London
Stock Exchange Index.
Sensitivity analysis
The table below summarises the impact of an increase/decrease of the available-for-sale financial assets on the Group's equity
for the year. The analysis is based on the assumption that the available-for-sale financial assets had increased by 10% or
decreased by 10% with all other variables held constant.
Available-for-sale assets - increase 10%
Available-for-sale assets - decrease 10%
IMPACT ON OTHER COMPONENTS
OF EQUIT Y
16
$’000
395
(255)
15
$’000
491
(351)
Other components of equity would increase/decrease as a result of gains/losses on equity securities classified as available-for-
sale. As the fair value of the available-for-sale financial assets would still be above cost, no impairment loss would be recognised
in profit or loss as a result of the decrease in the index.
Amounts recognised in profit or loss and other comprehensive income
The amounts recognised in other comprehensive income in relation to the various investments held by the Group are disclosed
in note 6(c).
(b) Credit risk
(i) Risk management
Credit risk is managed on a Group basis. Credit risk is the risk of financial loss to the Group if a customer or counterparty to a
financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers
and investment securities. Credit risk also arises from cash and cash equivalents. The Group limits its exposure to credit risk from
cash and cash equivalents by only investing in counterparties that have an acceptable credit rating.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
77
1 1 F I N A N C I A L R I S K M A N A G E M E N T (C O N T I N U E D)
(b) Credit risk (continued)
(ii) Credit quality
The Group’s maximum exposure to credit risk for receivables at the reporting date by geographic region was:
(AUD)
Australia
Africa
Asia
Europe
Trade receivables
Counterparties with external credit rating (Moody's)
A1
A2
A3
Ba1
Ba2
Ba3
Baa1
Baa2
Baa3
Caa1
Counterparties without external credit rating *
Group 1
Group 2
Group 3
Total trade receivables
The Group’s maximum exposure to credit risk for cash at bank and short term deposits was:
Cash at bank and short-term bank deposits
(AUD)
AA
AA-
A+
A
BBB+
BBB
B
Other
16
$’000
15
$’000
81,244
80,340
583
39
162,206
-
4
6,794
3,332
-
968
71
3,702
8,954
-
23,825
598
137,783
-
138,381
162,206
88
150,156
327
42
2,407
-
28,828
9
181,857
56,468
78,230
528
93
135,319
7,029
992
777
1,543
1,067
-
-
4,638
15,422
2
31,470
16,051
87,798
-
103,849
135,319
104
52,846
-
481
-
1,024
23,410
-
77,865
* Group 1 - new customers (less than 6 months)
Group 2 - existing customers (more than 6 months) with no defaults in the past
Group 3 - existing customers (more than 6 months) with some defaults in the past. All defaults were fully recovered.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 78
1 1 F I N A N C I A L R I S K M A N A G E M E N T (C O N T I N U E D)
(b) Credit risk (continued)
(iii) Impaired trade receivables
Individual receivables which are known to be uncollectible are written off by reducing the carrying amount directly. The other
receivables are assessed collectively to determine whether there is objective evidence that an impairment has been incurred
but not yet been identified. For these receivables the estimated impairment losses are recognised in a separate provision for
impairment. The Group considers that there is evidence of impairment if any of the following indicators are present:
significant financial difficulties of the debtor
probability that the debtor will enter bankruptcy or financial reorganisation, and
default or delinquency in payments (more than 90 days overdue).
Receivables for which an impairment provision was recognised are written off against the provision when there is no expectation
of recovering additional cash.
Impairment losses are recognised in profit or loss within other expenses. Subsequent recoveries of amounts previously written
off are credited against other expenses. See note 3 for information about how impairment losses are calculated.
As at 30 June 2016, current trade receivables of the Group with a nominal value of $15,083,005 (2015: $15,371,597) were
impaired. The amount of the provision for impaired receivables was $14,725,982 (2015: $14,364,212). The Group expects that a
portion of the receivables is to be recovered.
The aging of these receivables is as follows:
3 to 6 months
Over 6 months
Movements in the provision for impairment of trade receivables that are assessed for
impairment collectively are as follows:
At 1 July
Provision for impairment recognised during the year
Receivables written off during the year as uncollectable
Unused amounts reversed (including currency impact)
At 30 June
16
$’000
34
15,049
15,083
14,364
919
(521)
(36)
14,726
15
$’000
692
14,680
15,372
15,434
4,139
(5,609)
400
14,364
The creation and release of the provision for impaired receivables has been included in other expenses in the consolidated
statement of profit or loss. Amounts charged to the allowance account are generally written off when there is no expectation of
recovering additional cash.
(iv) Past due but not impaired
As at 30 June 2016, trade receivables of $26,133,183 (2015: $26,768,084 ) were past due but not impaired. These relate to a
number of independent customers for whom there is no recent history of default. The aging analysis of these trade receivables is
as follows:
Up to 2 months
Over 2 months
16
$’000
25,266
867
26,133
15
$’000
22,106
4,662
26,768
The other classes within trade and other receivables do not contain impaired assets and are not past due. Based on the credit
history of these other classes, it is expected that these amounts will be received when due.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
79
1 1 F I N A N C I A L R I S K M A N A G E M E N T (C O N T I N U E D)
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding
through an adequate amount of committed credit facilities and the ability to close out market positions. The Group manages
liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and
liabilities. Due to the dynamic nature of the underlying businesses, the Group aims at maintaining flexibility in funding by keeping
committed credit lines available with a variety of counterparties.
(i) Financing arrangements
The Group had access to the following undrawn borrowing facilities at the end of the reporting period:
Floating rate
- Bank loans
Maturities of financial liabilities
16
$’000
123,909
123,909
15
$’000
99,581
99,581
The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the
reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
CONTR ACTUAL MATURITIES OF
FINANCIAL LIABILITIES
LESS THAN
6 MONTHS
6 - 12
MONTHS
BET WEEN
1 AND 2
YEARS
BET WEEN
2 AND 5
YEARS
GROUP - AT 30 JUNE 2016
$’000
$’000
$’000
$’000
OVER 5
YEARS
$’000
TOTAL
CONTR ACTUAL
CASH FLOWS
CARRYING
AMOUNT
LIABILITIES
$’000
$’000
Trade payables
Variable rate
Fixed rate
Total
GROUP - AT 30 JUNE 2015
Trade payables
Variable rate
Fixed rate
Total
82,839
-
16,835
99,674
84,625
628
35,030
120,283
-
-
14,382
14,382
-
621
18,770
19,391
-
-
27,655
27,655
-
1,245
28,051
29,296
-
-
443,735
443,735
-
25,935
457,823
483,758
-
-
-
-
-
-
-
-
82,839
-
502,607
585,446
82,839
-
398,540
481,379
84,625
28,429
539,674
652,728
84,625
25,000
408,789
518,414
Details about the financial guarantee contracts are provided in note 24. The amounts disclosed in the table are the maximum
amounts allocated to the earliest period in which the guarantee could be called. The parent entity does not expect these
payments to eventuate.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 80
1 2 C A P I TA L M A N A G E M E N T
(a) Risk management
The Group’s objectives when managing its capital are to safeguard its ability to continue as a going concern, so it can continue to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of
capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares or sell assets to reduce debt.
Consistently with others in the industry, the Group monitors capital on the basis of the gearing ratio. The ratio is calculated as net debt
divided by total capital. Net debt is calculated as total borrowings, as shown in the statement of financial position, less cash and cash
equivalents. Total capital is calculated as ‘equity’ as shown in the statement of financial position plus net debt.
The gearing ratios at 30 June 2016 and 30 June 2015 were as follows:
Total borrowings
Less: cash and cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
See note 6(e) for information on financial covenants on borrowings.
(b) Dividends
(i) Ordinary shares
No final ordinary dividend for the year ended 30 June 2015 (2014: 2.0 cents) per fully paid share
No interim ordinary dividend for the year ended 30 June 2016 (2015: 1.0 cent) per fully paid share
Total dividends provided for or paid
Dividends paid in cash or satisfied by the issue of shares under the dividend reinvestment plan
during the years ended 30 June 2016 and 2015 were as follows:
Paid in cash
Satisfied by issue of shares
16
$’000
398,540
(181,857)
216,683
606,596
823,279
15
$’000
433,789
(77,865)
355,924
553,293
909,217
26%
39%
16
$’000
-
-
-
-
-
-
15
$’000
6,246
3,123
9,369
9,369
-
9,369
(ii) Dividends not recognised at the end of the reporting period
The directors have recommended not to pay a final dividend.
(iii) Franked dividends
Franking credits available for subsequent reporting periods based on a tax rate of 30%
(2015 - 30%)
39,290
41,967
The above amounts are calculated from the balance of the franking account as at the end of the reporting period, adjusted for
franking credits and debits that will arise from the settlement of liabilities or receivables for income tax and dividends after the end of
the year.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 81
G R O U P S T R U C T U R E
This section provides information which will help users understand how the group structure affects the financial position and performance of
the group as a whole. In particular, there is information about:
changes to the structure that occurred during the year as a result of business combinations and the disposal of discontinued operations;
transactions with non-controlling interests; and
interests in joint operations.
A list of significant subsidiaries is provided in note 14. This note also discloses details about the Group’s equity accounted investments.
13 Discontinued operations
14 Interests in other entities
82
85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
82
1 3 D I S C O N T I N U E D O P E R AT I O N S
(a) Drilling Tools Australia Pty Ltd
(i) Description
On 19 May 2016, the Company announced that it had agreed to sell the Drilling Tools Australia (DTA) business to Finnish
manufacturer the Robit Plc Group. Completion of that sale occurred on 30 June 2016 and is reported in the current period as
a discontinued operation. The Group entered into a two and half year preferred supply arrangement as a condition of the sale.
Financial information relating to the discontinued operation for the period to the date of disposal is set out below.
(ii) Financial performance and cash flow information
The financial performance and cash flow information presented are for the twelve months ended 30 June 2016 and
30 June 2015.
Revenue
Expenses
Profit before income tax
Income tax (expense) / benefit
Profit after income tax of discontinued operation
Reversal of impairment / (impairment) of PPE
Income tax (expense on reversal of impairment) / benefit on impairment
Impairment loss on write down to fair value
Gain / (loss) on sale of the subsidiary after income tax
Profit from discontinued operation
Other comprehensive income from discontinued operation
Net cash inflow from operating activities
Net cash inflow from investing activities
Net cash (outflow) from financing activities
Net increase/(decrease) in cash generated by the subsidiary
(iii) Details of the sale of the subsidiary
Consideration received or receivable:
Cash*
Carrying amount of net assets sold
Gain on sale before income tax and reclassification of foreign currency translation reserve
Income tax expense on gain
Capital losses applied
Tax losses applied
Gain on sale after income tax
15
$’000
23,928
(21,450)
2,478
(102)
2,376
(8,240)
2,471
-
-
(3,393)
-
7,965
641
(461)
8,145
16
$’000
20,342
(11,883)
8,459
(3,668)
4,791
6,133
(1,840)
(1,179)
33,227
41,132
-
14,376
109
(150)
14,335
16
$’000
66,000
(32,773)
33,227
(9,968)
4,402
5,566
33,227
* An amount of $19,800,000 remains outstanding and is due for settlement no later than 31 December 2016.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 83
16
$’000
13,042
2,512
20,611
36,165
(2,571)
(821)
(3,392)
32,773
1 3 D I S C O N T I N U E D O P E R AT I O N S (C O N T I N U E D)
(a) Drilling Tools Australia Pty Ltd (continued)
(iii) Details of the sale of the subsidiary (continued)
The carrying amounts of assets and liabilities as at the date of sale, 30 June 2016, were:
Property, plant and equipment
Trade receivables
Inventories
Total assets
Trade creditors
Employee benefits obligations
Total liabilities
Net assets
(b) DT HiLoad Australia Pty Ltd
(i) Description
On 8 January 2016, the Company announced that it was exiting its DT HiLoad (DTHL) truck tray manufacturing business with
effect from 31 March 2016, and that it was in negotiations with a number of parties. On 17 March 2016, the Company announced
it had completed the sale of the business to Schlam Engineering (Schlam) which included the sale of all brands, patents and
material fixed assets. Certain steel inventories will be sold to Schlam under a consignment arrangement. Residual inventories
and non-critical business assets were disposed of by way of auction or sale to third parties prior to 30 June 2016. DTHL is
reported in the current period as a discontinued operation. Financial information relating to the discontinued operation for the
period to the date of disposal is set out below.
(ii) Financial performance and cash flow information
The financial performance and cash flow information presented are for the twelve months ended 30 June 2016 and
30 June 2015.
Revenue
Expenses
(Loss) before income tax
Income tax benefit/(expense)
(Loss) after income tax of discontinued operation
Impairment of goodwill
Impairment loss on write down to fair value
Gains on sale of the subsidiary after income tax
(Loss) from discontinued operation
Other comprehensive income from discontinued operation
Net cash (outflow) from operating activities
Net cash (outflow) from investing activities
Net (decrease)/increase in cash generated by the subsidiary
16
$’000
5,763
(9,769)
(4,006)
1,382
(2,624)
-
(2,079)
1,482
(3,221)
-
(2,117)
(6)
(2,123)
15
$’000
22,052
(24,481)
(2,429)
830
(1,599)
(10,314)
-
-
(11,913)
-
620
(314)
306
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 84
1 3 D I S C O N T I N U E D O P E R AT I O N S (C O N T I N U E D)
(b) DT HiLoad Australia Pty Ltd (continued)
(iii) Details of the sale of the subsidiary
Consideration received or receivable:
Cash
Carrying amount of net assets sold
Gain on sale before income tax and reclassification of foreign currency translation reserve
Income tax expense on gain
Gain on sale after income tax
The carrying amounts of assets and liabilities as at the date of sale, 30 June 2016, were:
Property, plant and equipment
Total assets
16
$’000
3,169
(1,052)
2,117
(635)
1,482
16
$’000
1,052
1,052
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 85
1 4 I N T E R E S T S I N O T H E R E N T I T I E S
(a) Material subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following principal subsidiaries in
accordance with the accounting policy described in note 25(b):
NAME OF ENTIT Y
COUNTRY OF
INCORPOR ATION
CL ASS OF SHARES
EQUIT Y HOLDING **
16
%
15
%
African Mining Services Burkina Faso Sarl
African Mining Services (Ghana) Pty Ltd
African Mining Services Mali Sarl
African Mining Services Guinea Sarl
Ausdrill (Ghana) Pty Ltd
Ausdrill International & Management Services Pty Ltd
Ausdrill International Pty Ltd
Ausdrill Northwest Pty Ltd
Ausdrill Properties Pty Ltd
Ausdrill Tanzania Limited
Ausdrill Utilities Pty Ltd
Ausdrill Underground Mining Services Pty Ltd*
Brandrill Limited (1)
BTP Equipment Pty Ltd
BTP Parts Pty Ltd
Connector Drilling Pty Ltd
Diamond Communications Pty Ltd
Drill Rigs Australia Pty Ltd
Drilling Tools Australia Pty Ltd
ACN 103534087 Pty Ltd
Energy Drilling Australia Pty Ltd
Golden Plains Pty Ltd
Logistics Direct Australia Pty Ltd
Logistics Direct Pty Ltd
MinAnalytical Holdings Pty Ltd
MinAnalytical Laboratory Services Pty Ltd
Mining Technology and Supplies Ltd
Remet Engineers Pty Ltd (1)
Supply Direct Pty Ltd
Supply Direct South Africa Pty Ltd
Synegex Holdings Pty Ltd
West African Mining Services Ltd
AMCG
(1) Deregistered by ASIC 1 February 2016.
Burkina Faso
Australia
Mali
Guinea
Australia
Australia
Australia
Australia
Australia
Tanzania
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ghana
Australia
Australia
Ghana
Australia
Australia
Australia
Australia
Ghana
Ghana
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
-
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
* Ausdrill Underground Mining Services Pty Ltd was formerly Ausminco Mining & Equipment Supplies Pty Ltd.
** All controlled entities are directly controlled by Ausdrill Limited with the exception of:
African Mining Services Mali Sarl, African Mining Services (Ghana) Pty Ltd, West African Mining Services Limited and Ausdrill
Tanzania Limited which are 100% owned by Ausdrill International Pty Ltd.
African Mining Services Burkina Faso Sarl and African Mining Services Guinea Sarl are 100% owned by African Mining Services
(Ghana) Pty Ltd.
Mining Technology and Supplies Limited which is 100% owned by West African Mining Services Limited.
Supply Direct Pty Ltd which is 100% owned by Golden Plains Pty Ltd.
Supply Direct South Africa Pty Ltd, Logistics Direct Australia Pty Ltd and Logistics Direct Limited are 100% owned by Supply
Direct Pty Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
86
ACN 103534087 Pty Ltd (formerly known as DT HiLoad Australia Pty Ltd) is 100% owned by Ausdrill Limited.
1 4 I N T E R E S T S I N O T H E R E N T I T I E S (C O N T I N U E D)
(a) Material subsidiaries (continued)
MinAnalytical Laboratory Services Pty Ltd is 100% owned by MinAnalytical Holdings Pty Ltd.
Ausdrill Limited carries on business in Australia.
African Mining Services (Ghana) Pty Ltd, Ausdrill (Ghana) Pty Ltd, West African Mining Services Limited, Mining Technology and
Supplies Limited and Logistics Direct Limited carry or carried on business in Ghana.
Ausdrill Tanzania Limited carries on business in Tanzania. Ausdrill Utilities Pty Ltd has a branch which carries on business in Zambia.
African Mining Services Mali Sarl carries on business in Mali.
African Mining Services Burkina Faso Sarl carries on business in Burkina Faso.
African Mining Services Guinea Sarl carries on business in Guinea.
Supply Direct South Africa Pty Ltd carries on business in South Africa. Supply Direct Pty Ltd has a branch which carries on business
in the United Kingdom.
Steps have been taken for the voluntary liquidation of West African Mining Services Limited and Mining Technology
and Supplies Ltd.
(b) Interests in joint ventures
Set out below are the joint ventures of the Group as at 30 June 2016 which, in the opinion of the directors, are material to the Group.
The entities listed below have share capital consisting solely of ordinary shares, which are held directly by the Group. The country
of incorporation or registration is also their principal place of business, and the proportion of ownership interest is the same as the
proportion of voting rights held.
NAME OF ENTIT Y
PL ACE OF BUSINESS/
COUNTRY OF
INCORPOR ATION
% OF OWNERSHIP
INTEREST
NATURE OF
REL ATIONSHIP
MEASUREMENT
METHOD
CARRYING AMOUNT
16 15
%
%
16 15
$’000
$’000
African Underground Mining
Services
Ghana, Mali,
Burkina Faso and
Tanzania
50
50 Joint ventures Equity method
69,764
67,599
African Underground Mining Services is not a consolidated entity of Ausdrill Limited because Ausdrill Limited is not able to govern
the activities of this entity so as to obtain benefits from it.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
87
1 4 I N T E R E S T S I N O T H E R E N T I T I E S (C O N T I N U E D)
(b) Interests in joint ventures (continued)
(i) Summarised financial information for joint ventures
Financial information for those joint ventures that are material to the Group is provided below. The information disclosed reflects
the amounts presented in the financial statements of the relevant joint ventures and not Ausdrill Limited’s share of those
amounts. They have been amended to reflect adjustments made by the entity when using the equity method, including fair value
adjustments and modifications for differences in accounting policy.
SUMMARISED BAL ANCE SHEET
Current assets
Cash and other cash equivalents
Other current assets
Total current assets
Non-current assets
Current liabilities
Financial liabilities (excluding trade payables)
Other current liabilities
Total current liabilities
Non-current liabilities
Net assets
Reconciliation to carrying amounts:
Opening net assets 1 July
Profit for the year
Other comprehensive income
Investment in joint venture
Dividends paid
Closing net assets at 30 June
Group share in %
Group share in $
Carrying amount
SUMMARISED STATEMENT OF COMPREHENSIVE INCOME
Revenue
Interest income
Depreciation and amortisation expense
Interest expense
Income tax expense
Profit from continuing operations
Profit for the year
Other comprehensive income
Total comprehensive income
AFRICAN UNDERGROUND
MINING SERVICES
16
$’000
11,656
94,680
106,336
61,604
112
26,994
27,106
1,306
15
$’000
41,050
106,474
147,524
39,226
462
54,716
55,178
(3,626)
139,528
135,198
135,198
18,148
3,920
6
(17,744)
139,528
50.0%
69,764
69,764
153,264
2,150
(16,184)
(2,122)
(18,324)
18,148
18,148
3,920
22,068
135,184
26,024
13,168
-
(39,178)
135,198
50.0%
67,599
67,599
220,200
1,892
(25,914)
(1,816)
(6,674)
26,024
26,024
13,168
39,192
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 88
U N R E C O G N I S E D I T E M S
This section of the notes provides information about items that are not recognised in the financial statements as they do not (yet) satisfy the
recognition criteria.
In addition to the items and transactions disclosed below, there are also:
(a) Unrecognised tax amounts – see note 5
(b) Non-cash investing and financing transactions – see note 9(b).
15 Contingencies
16 Commitments
17
Events occurring after the reporting period
89
89
89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 89
1 5 C O N T I N G E N C I E S
(a) Contingent liabilities
In the course of its normal business, the Group occasionally receives claims arising from its operating activities. In the opinion of the
directors, all such matters are covered by insurance or, if not covered, are without merit or are of such a kind or involve such amounts
that would not have a material adverse effect on the operating results or financial position of the Group if settled unfavourably.
For information about guarantees given by entities within the Group, including the parent entity, please refer to note 24.
(b) Contingent assets
The Group has lodged claims in relation to two matters which at the date of this report are unresolved with one being subject to
litigation and the other to mediation. The directors are confident that favourable outcomes will be achieved. However, the contingent
assets have not been recognised as receivables at 30 June 2016 as receipt of these amounts are dependent on the outcome of the
arbitration process and the litigation.
1 6 C O M M I T M E N T S
(a) Capital commitments
Capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:
Property, plant and equipment
Payable:
Within one year
The capital commitments are to be funded from cash and available finance facilities.
(b) Non-cancellable operating leases
The Group leases various offices, warehouses and retail stores under non-cancellable operating
leases expiring within two to eight years. The leases have varying terms, escalation clauses and
renewal rights. On renewal, the terms of the leases are renegotiated. Excess warehouse space is
sub-let to third parties also under non-cancellable operating leases.
Commitments for minimum lease payments in relation to non-cancellable operating leases are
payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
16
$’000
15
$’000
172
743
16
$’000
5,671
2,067
20
7,758
15
$’000
7,920
6,617
36
14,573
1 7 E V E N T S O C C U R R I N G A F T E R T H E R E P O R T I N G P E R I O D
Since 30 June 2016, the Group entered into a sale agreement to sell its Miners Rest Motel business for $2.5 million which is expected to
be completed in September 2016 and remains subject to due diligence. The sale includes the land and buildings and all of the operational
assets of the Miners Rest Motel business. A fair value reduction of $0.9 million was made to the value of the land and buildings and
has been brought to account as at 30 June 2016. See note 7(b). The Group entered into a one year accommodation arrangement as a
condition of the sale.
On 1 August 2016, the Company agreed with Azumah Resources Limited to the redemption and settlement of its $2.0 million converting
note through the payment by Azumah of $1.0 million cash and the issue of 22,727,273 shares at a price of $0.044 each.
There are no other matters or circumstances that have arisen since the end of the financial year which significantly affected or may
significantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity
in subsequent financial years.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 90
O T H E R I N F O R M AT I O N
This section of the notes includes other information that must be disclosed to comply with the accounting standards and other
pronouncements, but that is not immediately related to individual line items in the financial statements.
18 Related party transactions
19 Share-based payments
20 Remuneration of auditors
21 Earnings per share
22 Assets pledged as security
23 Deed of cross guarantee
24 Parent entity financial information
25 Summary of significant accounting policies
91
93
95
96
97
98
101
102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 91
1 8 R E L AT E D PA R T Y T R A N S A C T I O N S
(a) Parent entities
The ultimate parent entity of the Group is Ausdrill Limited.
(b) Subsidiaries
Interests in subsidiaries are set out in note 14(a).
(c) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Detailed remuneration disclosures are provided in the remuneration report on pages 27 to 36
(d) Transactions with other related parties
The following transactions occurred with related parties:
Sales of goods and services
Associates
Entities controlled by key management personnel
Interest received / receivable
Associates
Management fee received / receivable
Associates
Purchase of goods
Rental office buildings
16
$
3,743,359
225,557
12,552
69,591
4,051,059
15
$
3,025,576
194,152
33,089
78,254
3,331,071
12,263,943
1,811,102
10,190,149
2,338,041
-
159,517
887,791
1,015,743
358,032
358,032
(i) Purchases from entities controlled by key management personnel
The Group acquired the following goods and services from entities that are controlled by members of the Group key
management personnel:
rental of an office building
provision of exploration drilling services
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
92
1 8 R E L AT E D PA R T Y T R A N S A C T I O N S (C O N T I N U E D)
(e) Outstanding balances arising from sales / purchases of goods and services
The following balances are outstanding at the end of the reporting period in relation to transactions with related parties:
Current receivables (sales of goods and services)
Joint ventures
Entities controlled by key management personnel
(f) Loans to/from related parties
Loans to joint ventures
Balance at 1 July
Loans repaid
Interest charged
Interest received
Balance at 30 June
Loans to key management personnel
Beginning of the year
Loans advanced
Loans repayments made
Interest charged
Interest received
End of period
(g) Terms and conditions
16
$’000
15
$’000
1,592,531
571,708
4,758,825
416,500
-
-
-
-
-
6,682,932
(6,682,932)
159,517
(159,517)
-
150,000
-
(150,000)
3,955
(3,955)
-
-
150,000
-
-
-
150,000
All transactions were made on normal commercial terms and conditions and at market rates, except that there are no fixed terms for
the repayment of loans between the parties. The average interest rate on loans to joint ventures during the year was nil (2015: 5.29%).
The loans to key management personnel are repayable in full within 6 months and are unsecured. Interest is payable at the rate of
8% per annum.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 93
1 9 S H A R E - B A S E D PAY M E N T S
(a) Employee Option Plan
The Employee Option Plan is designed to provide long-term incentives for senior managers (excluding executive directors) to deliver
long-term shareholder returns. Under the plan, participants are granted options which only vest if certain performance standards are
met. Participation in the plan is at the Board’s discretion and no individual has a contractual right to participate in the plan or to receive
any guaranteed benefits.
The amount of options that will vest depends on Ausdrill Limited’s total return to shareholders (TSR), including share price growth,
dividends and capital returns, ranking with a peer group of selected companies that are listed on the ASX over a period of time.
Once vested, the options remain exercisable for a period of 5 years from their issue date. Options are granted under the plan for nil
consideration.
Options granted under the plan carry no dividend or voting rights.
Set out below are summaries of options granted under the plan:
As at 1 July
Granted during the year
Exercised during the year
Forfeited during the year
As at 30 June
Vested and exercisable at closing balance
16
NUMBER OF
OPTIONS
11,000,000
11,600,000
-
(6,499,985)
16,100,015
200,000
AVER AGE
EXERCISE
PRICE PER
SHARE
OPTION
$1.80
$0.25
-
$1.70
$0.85
$3.68
15
NUMBER OF
OPTIONS
12,600,000
-
-
(1,600,000)
11,000,000
733,333
AVER AGE
EXERCISE
PRICE PER
SHARE
OPTION
$1.99
-
-
$3.27
$1.80
$3.01
No options expired during the periods covered by the above tables.
Share options outstanding at the end of the year have the following expiry date and exercise prices.
GR ANT DATE
29/11/2010
29/11/2010
29/11/2010
03/02/2011
03/02/2011
03/02/2011
09/03/2011
09/03/2011
09/03/2011
21/07/2011
21/07/2011
21/07/2011
07/10/2013
07/10/2013
07/10/2013
23/12/2015
23/12/2015
23/12/2015
EXPIRY DATE
29/11/2015
29/11/2015
29/11/2015
03/02/2016
03/02/2016
03/02/2016
09/03/2016
09/03/2016
09/03/2016
21/07/2016
21/07/2016
21/07/2016
07/10/2018
07/10/2018
07/10/2018
23/12/2020
23/12/2020
23/12/2020
EXERCISE
PRICE
SHARE
OPTIONS
30 JUNE 2016
SHARE
OPTIONS
30 JUNE 2015
$2.20
$2.30
$2.40
$3.20
$3.35
$3.50
$3.55
$3.70
$3.85
$3.55
$3.65
$3.85
$1.70
$1.70
$1.70
$0.25
$0.25
$0.25
-
-
-
-
-
-
-
-
-
66,666
66,667
66,667
-
2,399,985
2,400,030
3,699,979
3,699,979
3,700,042
16,100,015
100,000
100,000
100,000
66,666
66,667
66,667
33,333
33,333
33,334
66,666
66,667
66,667
3,399,980
3,399,980
3,400,040
-
-
-
11,000,000
Weighted average remaining contractual life of options outstanding at end of period
3.77 years
3.08 years
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 94
1 9 S H A R E - B A S E D PAY M E N T S (C O N T I N U E D)
(a) Employee Option Plan (continued)
(i) Fair value of options granted
There were 11,600,000 options granted during the year ended 30 June 2016 (2015: nil).
The assessed fair value at grant date of options granted during the year ended 30 June 2016 was 6.73 cents per option. The fair
value at grant date is independently determined using a Monte Carlo simulation valuation model that incorporates the probability
of the relative TSR vesting condition.
(a)
Options are granted for a five year period for no consideration and vest based on Ausdrill's TSR rating with a peer group of
selected companies as follows:
Tranche 1 (one third of the options) will become exercisable after the second anniversary of their date of issue;
Tranche 2 (a further one third of the options) will become exercisable after the third anniversary of their date of issue; and
Tranche 3 (the remaining one third of the options) will become exercisable after the fourth anniversary of their date
of issue.
(b) exercise price: $0.25
(c) grant date: 23 December 2015
(d) expiry date: 23 December 2020
(e) share price at grant date: $0.23
(f) expected price volatility of the Company's shares: 60%
(g) expected dividend yield: 4.3%
(h) risk-free interest rate: 2.0%
The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any
expected changes to future volatility due to publicly available information.
Where options are issued to employees of subsidiaries within the Group, the subsidiaries compensate Ausdrill Limited for the
amount recognised as expense in relation to these options.
(b) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense
were as follows:
Options issued under employee option plan
16
$’000
184
15
$’000
455
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
95
2 0 R E M U N E R AT I O N O F A U D I T O R S
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and
non-related audit firms:
(a) PricewaterhouseCoopers Australia
(i) Audit and other assurance services
Audit and review of financial statements
Total remuneration for audit and other assurance services
(ii) Taxation services
Tax compliance services
(iii) Other services
Advisory and accounting consulting services
Total remuneration of PricewaterhouseCoopers Australia
(b) Network firms of PricewaterhouseCoopers Australia
(i) Audit and other assurance services
Audit and other assurance services
(ii) Taxation services
Tax compliance services
(iii) Other services
Advisory and accounting consulting services
Total remuneration of network firms of PricewaterhouseCoopers Australia
(c) Non PricewaterhouseCoopers audit firms
(i) Audit and other assurance services
Audit and review of financial statements
Total remuneration for audit and other assurance services
Total auditors' remuneration
16
$
15
$
561,748
561,748
771,802
771,802
227,071
260,307
86,967
875,786
-
1,032,109
291,230
181,254
176,102
164,317
21,410
488,742
38,877
384,448
21,029
21,029
67,748
67,748
1,385,557
1,484,305
It is the Group's policy to employ PricewaterhouseCoopers on assignments additional to their statutory audit duties where
PricewaterhouseCoopers expertise and experience with the Group are important. These assignments are principally tax advice
and due diligence reporting on acquisitions, or where PricewaterhouseCoopers is awarded assignments on a competitive basis.
It is the Group's policy to seek competitive tenders for all major consulting projects.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 96
2 1 E A R N I N G S P E R S H A R E
(a) Basic earnings/(loss) per share
From continuing operations attributable to the ordinary equity holders of the Company
From discontinued operations
Total basic earnings/(loss) per share attributable to the ordinary equity holders of the Company
(b) Diluted earnings/(loss) per share
From continuing operations attributable to the ordinary equity holders of the Company
From discontinued operations
Total diluted earnings/(loss) per share attributable to the ordinary equity holders of the Company
(c) Reconciliation of earnings used in calculating earnings per share
Basic and diluted earnings per share
Profit/(loss) attributable to the ordinary equity holders of the Company used in calculating basic
earnings per share:
From continuing operations
From discontinued operations
(d) Weighted average number of shares used as denominator
16
CENTS
6.5
12.1
18.6
15
CENTS
(51.3)
(4.9)
(56.2)
CENTS
CENTS
6.3
11.9
18.2
(51.3)
(4.9)
(56.2)
$’000
$’000
20,239
37,911
58,150
(160,314)
(15,306)
(175,620)
NUMBER
NUMBER
Weighted average number of ordinary shares used as the denominator in calculating basic
earnings per share
312,277,224
312,277,224
Adjustments for calculation of diluted earnings per share:
Effect of share options on issue
7,117,396
-
Weighted average number of ordinary and potential ordinary shares used as the denominator in
calculating diluted earnings per share
319,394,620
312,277,224
(e) Information on the classification of securities
(i) Options
Options granted to employees are considered to be potential ordinary shares and have been included in the determination of
diluted earnings per share to the extent to which they are dilutive. The options have not been included in the determination of
basic earnings per share. Details relating to the options are set out in note 19.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 22 A S S E T S P L E D G E D A S S E C U R I T Y
The carrying amounts of assets pledged as security for current and non-current borrowings are:
Current
Floating charge
Cash and cash equivalents
Receivables
Inventory
Total current assets pledged as security
Non-current
Hire purchase / finance lease
Plant and equipment
Secured bank loans
Plant and equipment
Floating charge
Plant and equipment
Freehold land and buildings
Investment
Total non-current assets pledged as security
Total assets pledged as security
97
16
$’000
15
$’000
155,693
78,461
111,660
345,814
56,566
70,359
149,260
276,185
2,257
35,612
-
54,692
273,216
39,624
75,405
388,245
390,502
736,316
285,194
41,415
74,612
401,221
491,525
767,710
The consolidated entity’s hire purchase/finance lease liabilities are secured by the hire purchase/leased assets and in the event of
default, these revert to the lessor.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 98
23 D E E D O F C R O S S G U A R A N T E E
Ausdrill Limited and the entities noted below are parties to a deed of cross guarantee under which each company guarantees the debts of
the others. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and
a directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission.
The closed group consists of Ausdrill Limited and the following entities:
African Mining Services (Ghana) Pty Ltd;
Ausdrill International Pty Ltd;
Ausdrill Finance Pty Ltd;
Ausdrill Limited;
Ausdrill Northwest Pty Ltd;
Ausdrill Properties Pty Ltd;
Ausdrill Utilities Pty Ltd;
Ausdrill Underground Mining Services Pty Ltd;
BTP Parts Pty Ltd;
BTP Equipment Pty Ltd;
Connector Drilling Pty Ltd;
Diamond Communications Pty Ltd;
Drill Rigs Australia Pty Ltd;
ACN 103534087 Pty Ltd;
Energy Drilling Australia Pty Ltd;
Golden Plains Pty Ltd;
Supply Direct Pty Ltd; and
Synegex Holdings Pty Ltd.
(a) Consolidated statement of profit or loss, consolidated statement of comprehensive income and
summary of movements in consolidated retained earnings
The above companies represent a 'closed group' for the purposes of the Class Order, and as there are no other parties to the deed of
cross guarantee that are controlled by Ausdrill Limited, they also represent the 'extended closed group'.
On 30 June 2016, Ausdrill Limited sold all of the issued capital in Drilling Tools Australia Pty Ltd to Robit Australia Holdings Pty Ltd.
Drilling Tools Australia Pty Ltd was the subject of a notice of disposal contemplated by the deed of cross guarantee. The notice of
disposal was lodged with the Australian Securities and Investment Commission on 30 June 2016.
Set out over page is a consolidated income statement, a consolidated statement of comprehensive income and a summary of
movements in consolidated retained earnings for the closed group.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 99
23 D E E D O F C R O S S G U A R A N T E E (C O N T I N U E D)
(a) Consolidated statement of profit or loss, consolidated statement of comprehensive income and
summary of movements in consolidated retained earnings (continued)
Consolidated income statement
Revenue from continuing operations
Other income
Materials
Labour
Rental and hire
Depreciation and amortisation expense
Management fees
Finance costs
Other expenses from ordinary activities
Share of net profits of joint ventures accounted for using the equity method
Impairment of goodwill and other intangible assets
Impairment of property, plant and equipment
Impairment of available-for-sale assets
Profit/(loss) before income tax
Income tax (expense)/benefit
Profit/(loss) for the year
Consolidated statement of comprehensive income
Other comprehensive income
Profit/(loss) for the year
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Items that will not be reclassified to profit or loss
(Loss)/gain on revaluation of land and buildings
Gain/(loss) on revaluation of available-for-sale assets
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive income/(loss) for the year
Summary of movements in consolidated retained earnings
Retained earnings at the beginning of the financial year
Profit/(loss) for the year
Dividends provided for or paid
Retained earnings at the end of the financial year
16
$’000
15
$’000
553,365
78,342
(246,157)
(172,691)
(13,122)
(52,589)
(2,819)
(33,534)
(55,012)
9,074
-
-
(1,485)
63,372
(2,833)
60,539
624,365
5,906
(272,173)
(206,842)
(10,331)
(61,354)
(5,793)
(36,148)
(42,997)
13,012
(10,314)
(153,268)
-
(155,937)
14,858
(141,079)
60,539
(141,079)
132,367
(18,573)
(1,341)
1,178
132,204
192,743
15,412
60,539
-
75,951
5,982
(1,147)
(13,738)
(154,817)
183,351
(141,079)
(9,369)
32,903
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 100
23 D E E D O F C R O S S G U A R A N T E E (C O N T I N U E D)
(b) Consolidated statement of financial position
Set out below is a consolidated statement of financial position as at 30 June 2016 of the closed group.
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Available-for-sale financial assets
Current tax assets
Total current assets
Non-current assets
Receivables
Investments accounted for using the equity method
Available-for-sale financial assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Employee benefit obligations
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Employee benefit obligations
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
16
$’000
15
$’000
155,313
139,460
144,155
2,000
6,918
447,846
126,499
102,067
3,641
401,006
76,541
709,754
58,866
99,175
182,066
-
232
340,339
140,517
102,110
7,013
464,146
33,327
747,113
1,157,600
1,087,452
77,548
470
5,725
22,614
106,357
395,018
66,582
808
462,408
568,765
588,835
403,910
108,974
75,951
588,835
63,901
18,277
66
25,159
107,403
407,762
21,176
1,064
430,002
537,405
550,047
526,447
(9,303)
32,903
550,047
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 24 PA R E N T E N T I T Y F I N A N C I A L I N F O R M AT I O N
(a) Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Shareholders' equity
Issued capital
Reserves
Asset revaluation reserve
Share-based payments reserve
Pre-2015 reserve
Accumulated losses - 2015 reserve
Retained earnings
Total equity
Profit/(loss) for the period
Total comprehensive income
101
16
$’000
78,882
532,366
611,248
24,821
7,060
31,881
15
$’000
52,032
453,133
505,165
26,831
23,671
50,502
526,447
526,447
704
5,969
104,904
(183,177)
124,520
579,367
704
5,785
104,904
-
(183,177)
454,663
124,520
(183,177)
124,520
(183,037)
(b) Guarantees entered into by the parent entity
The parent entity has given unsecured guarantees in respect of:
(i)
leased and hire purchased equipment of subsidiaries amounting to $65,632 (2015: $3,983,809)
(ii)
funding of subsidiaries for acquisition of plant and equipment amounting to $nil (2015: $14,395,328)
In addition, there are cross guarantees given by Ausdrill Limited as described in note 23. No deficiencies exist in any of these
companies.
(c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2016 or 30 June 2015. For information about guarantees
given by the parent entity, please see above.
(d) Contractual commitments for the acquisition of property, plant or equipment
As at 30 June 2016, the parent entity had contractual commitments for the acquisition of property, plant and equipment totalling $nil
(30 June 2015: $237,785). These commitments are not recognised as liabilities as the relevant assets have not yet been received.
(e) Pre-2015 Reserve
Each reserve of the parent entity has the same nature and purpose as described fro the consolidated Group (in note 8(b)).
In addition the parent entity on 30 June 2016 and 30 June 2015 established separate reserves for the purpose of paying future
dividends. The reserves are referred to as the “Pre-2015 reserve” and the “Accumulated losses – 2015 reserve. On the date of
establishment the “Pre-2015 reserve” had an amount of $114,273,000 transferred to it from retained earnings and the
“Accumulated losses – 2015 reserve” had an amount of ($183,177,000) transferred to it from retained earnings.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 102
25 S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S
This note provides a list of all significant accounting policies adopted in the preparation of these consolidated financial statements.
These policies have been consistently applied to all the periods presented, unless otherwise stated. The financial statements are for the
consolidated entity consisting of Ausdrill Limited and its subsidiaries.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, and
Interpretations issued by the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act
2001. Ausdrill Limited is a for-profit entity for the purpose of preparing the financial statements.
(i) Compliance with IFRS
The consolidated financial statements of Ausdrill Limited and its subsidiaries also comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
(ii) New and amended standards adopted by the Group
The Group has adopted all new and amended Australian Standards and Interpretations mandatory for reporting periods
beginning on or after 1 July 2015, including:
AASB 2014-1 Amendments to Australian Accounting Standards (including Part A: Annual Improvements 2010-2012 and 2011-
2013 Cycles)
AASB 2015-1 Amendments to Australian Accounting Standards - Annual Improvements to Australian Accounting Standards
2012-2014 Cycle
AASB 2015-2 Amendments to Australian Accounting Standards - Disclosure Initiative: Amendments to AASB 101.
The adoption of these standards and interpretations did not have any material effect on the financial position or performance of
the Group.
(iii) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2016
reporting period and have not been early adopted by the Group.
AASB 9 ‘Financial Instruments’ introduces changes in three areas:
- Financial assets will be categorised according to a cash flow and business model test. The outcome of these tests will
drive the measurement of financial assets at either amortised cost, fair value through profit or loss or fair value through
other comprehensive income;
-
Impairment of financial assets will be based on an expected loss rather than incurred loss model; and
- Simplifications to hedge accounting.
AASB 9 is not mandatory until 1 July 2018 for the Group.
AASB 15 ‘Revenue from Contracts with Customers’ introduces a single model for the recognition of revenue based on when
control of goods and services transfers to a customer. It does not apply to financial instruments. AASB 15 is not mandatory
until 1 July 2018 for the Group.
AASB 16 ‘Leases’ amends the accounting for leases. Lessees will be required to bring all leases on balance sheet as the
distinction between operating and finance leases has been eliminated. Lessor accounting remains largely unchanged. AASB
16 is not mandatory until 1 July 2019 for the Group.
The potential financial impacts of the above to the Group have not yet been determined. The Group does not intend to early adopt
these standards.
Other amendments to existing standards that are not yet effective are not expected to result in significant changes to the Group’s
accounting policies.
(iv) Historical cost convention
These financial statements have been prepared on a historical cost basis except for the following:
revaluation of land and buildings
available-for-sale financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit
or loss
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
103
25 S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S (C O N T I N U E D)
(b) Principles of consolidation
(i) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for all business combinations by the Group (refer to note 25(h)).
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by
the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of
comprehensive income, consolidated statement of changes in equity and consolidated statement of financial position
respectively.
(ii) Joint arrangements
Under AASB 11 Joint Arrangements, investments in joint arrangements are classified as either joint operations or joint ventures.
The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint
arrangement. Ausdrill Limited has only joint ventures.
Joint ventures
Interests in joint ventures are accounted for using the equity method (see (iii) below), after initially being recognised at cost in the
consolidated statement of financial position.
(iii) Equity method
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the
Group's share of the post-acquisition profits or losses of the investee in profit or loss, and the Group's share of movements in other
comprehensive income of the investee in other comprehensive income. Dividends received or receivable from joint ventures are
recognised as a reduction in the carrying amount of the investment.
When the Group's share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any
other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made
payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group's interest
in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with
the policies adopted by the Group.
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity
owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling
and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the
adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity
attributable to owners of Ausdrill Limited.
(iv) Changes in ownership interests
When the Group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured
to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for
the purposes of subsequently accounting for the retained interest as a joint venture or financial asset. In addition, any amounts
previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group has directly
disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income
are reclassified to profit or loss.
If the ownership interest in a joint venture is reduced, but joint control or significant influence is retained, only a proportionate
share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
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(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating
segments, has been identified as the Board.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary
economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are
presented in Australian dollars ($), which is Ausdrill Limited's functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or
loss. They are deferred in equity if they are attributable to part of the net investment in a foreign operation.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of
the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair
value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non-
monetary assets such as equities classified as available-for-sale financial assets are recognised in other comprehensive income.
(iii) Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation currency are translated into the presentation currency as follows:
assets and liabilities for each statement of financial position presented are translated at the closing rate at end of the reporting
period
income and expenses for each income statement and statement of comprehensive income are translated at average
exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the dates of the transactions)
all resulting exchange differences are recognised in other comprehensive income
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings
and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income.
When a foreign operation is sold or any borrowings forming part of the net investment are repaid, exchange differences are
reclassified to profit or loss, as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign
entity and translated at the closing rate.
(e) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns,
trade allowances and duties and taxes paid.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits
will flow to the entity and specific criteria have been met for each of the Group's activities as described below. The Group bases
its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each
arrangement.
The specific accounting policies for the Group’s main types of revenue are explained in note 2. Revenue for other business activities is
recognised on the following basis:
(i)
Interest income
Interest income is recognised using the effective interest method. When a receivable is impaired, the Group reduces the carrying
amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the
instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the
original effective interest rate.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
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(f) Income tax
The income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the national
income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences
between the tax base of assets and liabilities and their carrying amount in the financial statements, and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting
period in the countries where the Company's subsidiaries and associates operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated financial statements. However, deferred income tax is not accounted
for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that
have been enacted or substantially enacted by the end of the statement of financial position date and are expected to apply when the
related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary
differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of
investments in foreign operations where the Company is able to control the timing of the reversal of the temporary differences and it
is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and
when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the
entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Ausdrill Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. As a
consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set-off in the
consolidated financial statements.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
(i)
Investment allowances and similar tax incentives
Companies within the Group may be entitled to claim special tax deductions for investments in qualifying assets or in relation to
qualifying expenditure (e.g. the Research and Development Tax Incentive regime in Australia or other investment allowances).
The Group accounts for such allowances as tax credits, which means that the allowance reduces income tax payable and
current tax expense. A deferred tax asset is recognised for unclaimed tax credits that are carried forward as deferred tax assets.
(g) Leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are
classified as finance leases (note 7(b)). Finance leases are capitalised at lease inception at the fair value of the leased property,
plant and equipment or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of
finance charges, are included in other current and non-current payables. Each lease payment is allocated between the liability and
finance cost. The finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is
depreciated over the shorter of the asset's useful life and the lease term.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as
operating leases (note 6(e)). Payments made under operating leases (net of any incentives received from the lessor) are charged to
income statement on a straight-line basis over the period of the lease.
Lease income from operating leases is recognised in income on a straight-line basis over the lease term.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 106
25 S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S (C O N T I N U E D)
(h) Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or
other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:
fair values of the assets transferred
liabilities incurred to the former owners of the acquired business
equity interests issued by the Group
fair value of any asset or liability resulting from a contingent consideration arrangement
fair value of any pre-existing equity interest in the subsidiary
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions,
measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquired entity
on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired
entity’s net identifiable assets.
Acquisition-related costs are expensed as incurred.
The excess of the:
consideration transferred;
amount of any non-controlling interest in the acquired entity; and
acquisition date fair value of any previous equity interest in the acquired entity
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the
net identifiable assets of the subsidiary acquired, the difference is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present
value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar
borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest
in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurements are
recognised in profit or loss.
(i)
Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less costs to sell and value-in-use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets, other than
goodwill that suffered an impairment, are reviewed for possible reversal of the impairment at each reporting period.
(j) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at
call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are
readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.
Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
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(k) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for impairment.
See note 6(b) for further information about the Group's accounting for trade receivables and note 11(b) for a description of the Group's
impairment policies.
(l) Inventories
(i) Consumables and store items, work in progress and finished goods
Consumables and store items, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost
comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter
being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of
weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated
costs of completion and the estimated costs necessary to make the sale.
(m) Investments and other financial assets
The Group classifies its investments in the following categories:
loans and receivables
available-for-sale financial assets
The classification depends on the purpose for which the investments were acquired. Management determines the classification of its
investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at the end of
each reporting period. See note 6 for details about each type of financial asset.
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling
the receivable. They are included in current assets, except for those with maturities greater than 12 months after statement
of financial position date which are classified as non-current assets. Loans and receivables are included in trade and other
receivables (note 6(b)).
(ii) Available-for-sale financial assets
Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either
designated in this category or not classified in any of the other categories. They are included in non-current assets unless the
investment matures or management intends to dispose of the investment within 12 months of the end of the reporting period.
Investments are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and
management intends to hold them for the medium to long-term.
Financial assets - recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date - the date on which the Group commits to purchase
or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value
through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction
costs are expensed in profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in other comprehensive
income are reclassified to profit or loss as gains and losses from investment securities.
Subsequent measurement
Loans and receivables are carried at amortised cost using the effective interest method.
Available-for-sale financial assets are subsequently carried at fair value.
Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analysed
between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of
the security. The translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes
in carrying amount are recognised in other comprehensive income. Changes in the fair value of other monetary and non-monetary
securities classified as available-for-sale are recognised in other comprehensive income.
Details on how the fair value of financial instruments is determined are disclosed in note 6(f).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
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25 S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S (C O N T I N U E D)
(m) Investments and other financial assets (continued)
Impairment
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of
financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only
if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset
(a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of
financial assets that can be reliably estimated. In the case of equity investments classified as available-for-sale, a significant or
prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired.
(i) Assets carried at amortised cost
For loans and receivables, the amount of the loss is measured as the difference between the asset's carrying amount and
the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at
the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is
recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring
any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may
measure impairment on the basis of an instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the
previously recognised impairment loss is recognised in profit or loss.
Impairment testing of trade receivables is described in note 11(b).
(ii) Assets classified as available-for-sale
If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss - measured as the
difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously
recognised in profit or loss - is removed from equity and recognised in profit or loss.
Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a
subsequent period.
(n) Property, plant and equipment
The Group's accounting policy for land and buildings is explained in note 7(b). All other plant and equipment is stated at historical cost
less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Increases in the carrying amounts arising on revaluation of land and buildings are credited, net of tax, in other comprehensive income
and accumulated in reserves in shareholders' equity. To the extent that the increase reverses a decrease previously recognised in
profit or loss, the increase is first recognised in profit or loss. Decreases that reverse previous increases of the same asset are first
recognised in other comprehensive income to the extent of the remaining surplus attributable to the asset; all other decreases are
charged to income statement.
The depreciation methods and periods used by the group are disclosed in note 7(b).
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
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 (note 25(i)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These gains or losses are included in
profit or loss.
(o) Intangible assets
(i) Goodwill
Goodwill is measured as described in note 25(h). Goodwill on acquisitions of subsidiaries is included in intangible assets.
Goodwill on acquisitions of associates is included in investments in associates. Goodwill is not amortised. Instead, goodwill is
tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is
carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of
goodwill relating to the entity sold.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 109
25 S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S (C O N T I N U E D)
(o) Intangible assets (continued)
(i) Goodwill (continued)
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-
generating units or groups of cash-generating units that are expected to benefit from the business combination in which the
goodwill arose, identified according to operating segments (note 1).
(ii) Research and development
Expenditure on research activities, undertaken with the prospect of obtaining new scientific or technical knowledge and
understanding, is recognised in the income statement as an expense when it is incurred.
Expenditure on development activities, being the application of research findings or other knowledge to a plan or design for the
production of new or substantially improved products or services before the start of commercial production or use, is capitalised if
the product or service is technically and commercially feasible and adequate resources are available to complete development.
The expenditure capitalised comprises all directly attributable costs, including costs of materials, services, direct labour and an
appropriate proportion of overheads. Other development expenditure is recognised in the income statement as an expense as
incurred. Capitalised development expenditure is stated at cost less accumulated amortisation. Amortisation is calculated using
the straight-line method to allocate the cost over the period of the expected benefit.
(iii) Designs and drawings
Designs and drawings acquired as part of a business combination are recognised separately from goodwill. The designs
and drawings are carried at their fair value at the date of acquisition less accumulated amortisation and impairment losses.
Amortisation is calculated based on the projected technical life of the design and drawings, which is expected to be five years.
(p) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid.
The amounts are unsecured and are usually paid within 45 to 60 days of recognition. Trade and other payables are presented as
current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value
and subsequently measured at amortised cost using the effective interest method.
(q) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised
cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over
the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as
transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is
deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn
down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged,
cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred
to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in other
income and other expenses.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least
12 months after the reporting period.
(r) Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to
complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.
(s) Provisions
Provisions for legal claims are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions
are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one
item included in the same class of obligations may be small.
Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present
obligation at the statement of financial position date. The discount rate used to determine the present value reflects current market
assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time
is recognised as interest expense.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016 110
25 S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S (C O N T I N U E D)
(t) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave that are expected to be settled
wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect
of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the
liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
(ii) Other long-term employee benefit obligations
The liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after the end of the
period in which the employees render the related service. They are therefore measured as the present value of expected future
payments to be made in respect of services provided by employees up to the end of the reporting period using the projected
unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures
and period of service. Expected future payments are discounted using market yields at the end of the reporting period of high
quality corporate bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows.
Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer
settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur.
(iii) Share-based payments
Share-based compensation benefits are provided to employees via the Ausdrill Limited Employee Option Plan and an employee
share scheme. Information relating to these schemes is set out in note 19.
The fair value of options granted under the Ausdrill Limited Employee Option Plan is recognised as an employee benefit expense
with a corresponding increase in equity.
The fair value at grant date is independently determined using a Black-Scholes or Monte Carlo option pricing model that takes
into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-
tradable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected
dividend yield and the risk-free interest rate for the term of the option.
(u) Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.
Incremental costs directly attributable to the issue of new shares for the acquisition of a business are not included in the cost of the
acquisition as part of the purchase consideration.
(v) Maintenance and repairs
Maintenance, repair costs and minor renewals are charged as expenses as incurred. Significant costs incurred in overhauling plant and
equipment are capitalised and depreciated over the remaining useful life of the asset or the component in accordance with note 25(n).
(w) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the
entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
(x) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares
by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in
ordinary shares issued during the year.
(ii) 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
the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
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(y) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from
the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from,
or payable to, the taxation authority is included with other receivables or payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are
recoverable from, or payable to the taxation authority, are presented as operating cash flows.
(z) Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191, issued by
the Australian Securities and Investments Commission, relating to the 'rounding off' of amounts in this report and the accompanying
financial report. Amounts in this report and the accompanying financial report have been rounded off to the nearest thousand dollars,
or in certain cases, to the nearest dollar.
(aa) Parent entity financial information
The financial information for the parent entity, Ausdrill Limited, disclosed in note 24 has been prepared on the same basis as the
consolidated financial statements, except as set out below.
(i)
Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of Ausdrill
Limited. Dividends received from associates are recognised in the parent entity's profit or loss when its right to receive the
dividend is established.
(ii) Tax consolidation legislation
Ausdrill Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.
The head entity, Ausdrill Limited, and the controlled entities in the tax consolidated group account for their own current and
deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-
alone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Ausdrill Limited also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax
consolidated group.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Ausdrill
Limited for any current tax payable assumed and are compensated by Ausdrill Limited for any current tax receivable and
deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Ausdrill Limited under the tax
consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned
entities' financial statements.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head
entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of
interim funding amounts to assist with its obligations to pay tax instalments.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts
receivable from or payable to other entities in the Group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are
recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.
(iii) Financial guarantees
Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries for no compensation,
the fair values of those guarantees are accounted for as contributions and recognised as part of the cost of the investment.
(iv) Share-based payments
The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group
is treated as a capital contribution to that subsidiary undertaking. The fair value of employee services received, measured
by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary
undertakings, with a corresponding credit to equity.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDAUSDRILL ANNUAL REPORT 2016
112
A U S D R I L L A N N U A L R E P O R T 2 0 1 6
D I R E C T O R S ' D E C L A R AT I O N
D I R E C T O R S ' D E C L A R AT I O N
In the directors' opinion:
(a) the financial statements and notes set out on pages 40 to 111 are in accordance with the Corporations Act 2001, including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and
(ii)
giving a true and fair view of the consolidated entity's financial position as at 30 June 2016 and of its performance for the financial
year ended on that date
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable, and
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identified in note
23 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee
described in note 23.
Note 25(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the
Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
Ronald George Sayers
Managing Director
Perth
24 August 2016
A U S D R I L L A N N U A L R E P O R T 2 0 1 6
I N D E P E N D E N T A U D I T O R ' S R E P O R T
113
Independent auditor’s report
To the members of Ausdrill Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Ausdrill Limited (the Company) and its subsidiaries (together
the Group) is in accordance with the Corporations Act 2001, including:
a)
giving a true and fair view of the Group’s financial position as at 30 June 2016 and of its
financial performance for the year then ended; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group’s financial report comprises:
PENDING
the consolidated statement of financial position as at 30 June 2016;
the consolidated statement of profit or loss for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flowsP
Pfor the year then ended;
the notes to the consolidated financial statements, which include a summary of significant
accounting policies; and
the directors’ declaration.
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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
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.
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
P
114
Our audit approach
Overview
Materiality
For the purpose of our audit we used overall group materiality of
$960,000, which represents 5% of the three year average of Group profit
before tax from continuing operations, adjusted for impairment
Audit scope
We (PwC Australia), PwC Cote d’Ivoire and PwC Ghana conducted audit
work over the most significant operations in the eight countries in which
the Group operates
Key audit matters
Assessment of impairment for non-current assets
Assessment of recoverability of deferred tax assets in Australia
Inventory existence
Sale of non-core assets
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to provide
reasonable assurance about whether the financial report is free from material misstatement.
Misstatements may arise due to fraud or error. They are considered material if individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of the financial report.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall group materiality for the financial report as a whole as set out in the table below.
These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the financial report as a whole.
INDEPENDENT AUDITOR'S REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016 115
Overall group materiality
We determined overall group materiality to be $960,000.
We applied this threshold in:
How we determined it
Rationale for the materiality
benchmark applied
planning and performing the audit
evaluating the effect of:
-
-
identified misstatements on the audit, and
uncorrected misstatements, if any, on the financial
report
forming our opinion in the auditor’s report
This represents 5% of average Group profit before tax from
continuing operations over the last three years, adjusted for
impairment
We chose the benchmark because, in our view, profit before
tax from continuing operations is the metric against which
the performance of the Group is most commonly measured.
Due to fluctuations in profit and loss from year to year, we
chose a three year average. We also adjusted for impairment
and discontinued operations as they are unusual or
infrequently occurring items impacting profit and loss.
We utilised a 5% threshold based on our professional
judgement, noting it is within the range of commonly
acceptable thresholds.
Audit scope
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the financial report. In particular, we considered where the directors made subjective
judgements; for example, in respect of significant accounting estimates that involved making
assumptions and considering future events that are inherently uncertain. We also addressed the risk of
management override of internal controls including, among other matters, consideration of whether
there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, the Group’s accounting processes and controls, and the industry in which the
Group operates.
INDEPENDENT AUDITOR'S REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016 116
The Group has three main operating segments being Drilling Services Australia, Contract Mining
Services Africa and Equipment Services and Supplies and has an All Other and Corporate Finance
Segment based in Perth.
In establishing the overall approach to the Group audit, we determined the type of work that needed to
be performed by us, as the group engagement team, and by component auditors from other PwC
network firms in Africa operating under our instruction. We structured our audit as follows:
We performed audit procedures on the financial information of the Ausdrill Limited, Energy
Drilling Australia, Drilling Tools Australia, Ausdrill Northwest, BTP Parts and BTP Equipment
businesses because these were financially significant
PwC Cote d’Ivoire performed audits over AMS Mali, AMS Burkina Faso, AMS Guinee and the
joint ventures with Barminco Limited for AUMS Burkina Faso and AUMS Mali
PwC Ghana performed an audit over AMS Ghana
We performed further audit procedures at a Group level, including auditing the consolidation
of the Group’s reporting units and the preparation of the financial report.
For the work performed by PwC Cote d’Ivoire and PwC Ghana, we determined the level of involvement
we needed to have in the audit work at those locations to be satisfied that sufficient audit evidence had
been obtained as a basis for our opinion on the Group financial report as a whole. This included active
dialogue throughout the year through discussions and written instructions and reporting.
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. We have communicated the key audit matters
to the Audit & Risk Committee, but they are not a comprehensive reflection of all matters that were
identified by our audit and that were discussed with the committee. In the table below we have
described the key audit matters we identified and have included a summary of the principal audit
procedures we performed to address those matters.
The key audit 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. Further,
any commentary on the outcomes of a particular audit procedure is made in that context.
INDEPENDENT AUDITOR'S REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016 117
Key audit matter
How our audit addressed the key audit
matter
Assessment of impairment for non-current
assets
Refer to note 3 of the financial report.
At 30 June 2016 the Group held $489.8 million of
property, plant and equipment. Due to varying
levels of profitability during the year, the Group
considered whether there were any indicators of
impairment for each of its seven cash generating
units (CGUs).
Where a CGU was performing below its forecast
cash flows and had high underutilisation of
property, plant and equipment, the Group
considered that there was an impairment indicator
and performed an impairment assessment.
Indicators of possible impairment were identified
in the Ausdrill Northwest and Energy Drilling
Australia CGUs.
Following the identification of possible
impairment of assets, the Group engaged an
independent valuer to undertake a valuation in
relation to these assets. The valuations supported
the carrying values of the assets. The Group
concluded no impairment charge was required in
these two CGUs.
As the other five CGUs had incurred a significant
impairment charge in the previous financial year,
the Group assessed whether any reversal of the
prior period impairment charge was necessary for
2016 and concluded it was not.
We focused on this matter because of the
significant judgement involved in considering if
there was an impairment indicator and estimating
the value of assets and the potentially material
impact on the financial report.
We compared the previous year’s cash flow
forecasts and estimated utilisation rates for 2016
with the actual results achieved in 2016 for all
CGUs. We found that actual 2016 performance
was consistent with the forecast cash flow
performance and utilisation rates except for the
Ausdrill Northwest and Energy Drilling Australia
CGUs meaning:
the Ausdrill Northwest and Energy
Drilling Australia CGUs had indicators of
impairment and further audit testing was
required
there were no CGUs which significantly
exceeded forecasts so no further audit
testing was required in respect of
potential reversals of impairment
For Ausdrill Northwest and Energy Drilling
Australia, we:
examined the independent valuation
reports obtained by the Group to
determine if the valuations supported
asset carrying values
assessed the competency of the valuer
which included considering their
experience and qualifications in assessing
similar types of assets
agreed the listings of all assets included in
the valuations to the underlying assets
included in the CGUs to test completeness
of the valuations
utilised PwC valuation experts to review
the methodologies adopted in the
valuations obtained. No inconsistencies
with Australian Accounting standard
requirements were identified
INDEPENDENT AUDITOR'S REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016 118
Key audit matter
How our audit addressed the key audit
matter
Recoverability of deferred tax assets in
Australia
Refer to note 5 of the financial report.
The Group had $37.3 million of deferred tax assets
recognised at 30 June 2016. Australian
Accounting Standards require deferred tax assets
to be recognised only to the extent that it is
probable that sufficient future taxable profits will
be generated in order for the benefits of the
deferred tax assets to be realised. These benefits
are realised by reducing tax payable on future
taxable profits.
We focussed on this matter because of the impact
on the financial report and because significant
judgement is required to assess whether there will
be sufficient future taxable profits to utilise the
recognised deferred tax assets.
We assessed the Group’s ability to utilise the
deferred tax assets by:
obtaining calculations of forecast taxable
income for the next five years and
agreeing these to the latest Board
approved budget and forecast
comparing the latest Board approved
budget to historical performance to assess
the consistency and accuracy of the
Group’s approach to budgeting as
compared to prior periods
challenging management’s key
assumptions in the cashflow budget and
forecasts
evaluating whether the cashflows had
been appropriately adjusted for the
differences between accounting profits, as
presented in the approved Board budget
and forecast, to taxable profits. PwC Tax
experts assisted in undertaking this
evaluation
recalculating deferred tax asset balances
which comprise a combination of timing
differences between tax and accounting
values and tax losses
assessing whether deferred tax assets had
been appropriately recognised in the
financial report as at 30 June 2016 based
on the extent to which they can be
recovered by future taxable profits
No adjustments to deferred tax assets were
identified from these procedures.
Inventory existence
Refer to note 7(a) of the financial report.
The Group recognised inventory of $191.4 million
at 30 June 2016. Inventory is held by 28 entities
across the Group in various countries including
Australia, Ghana, Mali, Tanzania, Burkina Faso,
Guinea, South Africa and the United Kingdom.
Within each country, inventory is stored in
warehouses, sheds, containers, yards, attached to
drill rigs and at mine sites, often situated in very
remote locations due to the nature of the mining
services industry.
We and the PwC network component auditors
attended inventory counts at locations, selected
based on financial significance and risk. Where
locations were not attended we tested certain
controls over inventory existence across the
Group.
For locations attended in Australia, Ghana, Mali,
Burkino Faso and Guinee we performed the
following procedures at each site:
selected a sample of inventory items and
compared the quantities we counted to
the quantities recorded
INDEPENDENT AUDITOR'S REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016 119
Key audit matter
We focussed on this matter because of the:
significance of the inventory balance to the
profit and statement of financial position
complexity involved in determining
inventory quantities on hand due to the
number, location and diversity of
inventory storage locations
Sale of non-core assets
Refer to note 13 of the financial report.
During the year the Group sold two businesses,
Drilling Tools Australia and DT Hi Load, for total
proceeds of $66 million and $3.2 million,
respectively. The Group was required to calculate
the gain on disposal, which was complex due to
the detailed terms in the sales agreements.
The disclosure of these transactions in the
financial report was also complex as the Group
needed to separate its assets, liabilities and
operations into continuing and discontinued
business operations which has a significant and
pervasive impact on the financial results and
report of the Group.
We focussed on this matter because of the
importance to readers of the financial report of the
allocation between continued and discontinued
operations and the material impact of the gain on
disposal on the financial report.
How our audit addressed the key audit
matter
observed a sample of management’s
inventory count procedures to assess
compliance with Group policy
made enquiries regarding obsolete
inventory items and looked at the
condition of items counted
There were no significant exceptions noted from
these procedures.
We tested a sample of inventory items to assess
whether they were recorded at a value higher than
that for which they could be sold. We did not
identify any exceptions.
To assess whether the sale transactions for both
businesses had been appropriately accounted for
we:
read the sale agreements for Drilling
Tools Australia and DT Hi-Load and
found that the sale transactions had been
recorded and disclosed in accordance with
the terms of the respective sale
agreements
recalculated the carrying value of the
assets and liabilities as identified in the
sales agreements to test that these were
accurately separated from the continuing
business
reperformed the calculations of the gain
on disposal by comparing the
consideration received to the carrying
value of the identified assets and
liabilities, noting no significant
differences
agreed the consideration received from
the sales to the respective contracts and,
where already received, to bank records
tested that the carrying values of
previously impaired property, plant and
equipment had been appropriately
reversed prior to calculating the gain on
disposal as in accordance with Australian
Accounting Standards
examined the discontinued operations
disclosures included in the financial
report and found them to be compliant
with the requirements of the Australian
Accounting Standards
INDEPENDENT AUDITOR'S REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016 120
Other information
The directors are responsible for the other information. The other information comprises the
Operating and financial review Report and Director’s Report and other information included in the
Group’s annual report for the year ended 30 June 2016 but does not include the financial report and
our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the 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 the financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
INDEPENDENT AUDITOR'S REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016 121
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial report or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and
events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain
solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and 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 for 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.
INDEPENDENT AUDITOR'S REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016 122
Report on the remuneration report
Our opinion on the remuneration report
We have audited the Remuneration Report included in pages 27 to 36 of the directors’ report for the
year ended 30 June 2016.
In our opinion, the Remuneration Report of Ausdrill Limited for the year ended 30 June 2016
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.
PricewaterhouseCoopers
Justin Carroll
Partner
Perth
24 August 2016
INDEPENDENT AUDITOR'S REPORT CONTINUEDAUSDRILL ANNUAL REPORT 2016 A U S D R I L L A N N U A L R E P O R T 2 0 1 6
S H A R E H O L D E R I N F O R M AT I O N
123
A . D I S T R I B U T I O N O F E Q U I T Y S E C U R I T I E S
Analysis of numbers of equity security holders by size of holding as at 31 July 2016:
HOLDING
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
There were 1,638 holders of less than a marketable parcel of 500 ordinary shares.
B . E Q U I T Y S E C U R I T Y H O L D E R S
The names of the twenty largest holders of quoted equity securities as at 31 July 2016 are listed below:
ORDINARY SHARES
NUMBER OF
HOLDERS
2,564
2,677
1,226
1,690
191
8,348
SHARES
936,644
7,172,513
9,541,462
47,725,761
246,900,844
312,277,224
NAME
1. HSBC Custody Nominees (Australia) Limited
2. Cherry Garden Nominees Pty Ltd
3. Citicorp Nominees Pty Ltd
4. JP Morgan Nominees Australia Limited
5. Bremerton Pty Ltd
6. National Nominees Limited
7. ABN AMRO Clearing Sydney Nominees Pty Ltd
8. HSBC Custody Nominees (Australia) Limited
9. Brazil Farming Pty Ltd
10. CTS Funds Pty Ltd
11. BNP Paribas Noms Pty Ltd
12. Mr Frederick G Moir & Mr Kevin V Benson
13. Mr Brian Gregory & Mrs Wendy Joy Wright
14. Mrs Patricia Gladys Wright
15. Royale Blue Pty Ltd
16. HSBC Custody Nominees (Australia) Limited A/C 3
17. Mr Peter M Bartlett & Mrs Julie L Bartlett
18. Yolena Pty Ltd
19. Mrs PG Wright & Mr MG Wright & Mr JG Wright
20. Fulton Securities Pty Ltd
Total held by the twenty largest shareholders
C . S U B S TA N T I A L H O L D E R S
Substantial holders in the Company are set out below as at 31 July 2016:
NAME
1. Cherry Garden Nominees Pty Ltd / Ronald George Sayers
2. FMR LLC
3. Bremerton Group / PM & JL Bartlett
D . V O T I N G R I G H T S
ORDINARY SHARES
NUMBER HELD
PERCENTAGE OF
ISSUED SHARES
39,420,351
36,301,664
33,757,577
18,878,825
18,372,661
14,122,193
3,943,720
3,506,646
3,500,000
3,139,665
3,050,685
3,000,018
2,584,380
2,466,233
2,267,000
2,260,906
1,552,793
1,354,800
1,221,500
1,200,000
195,901,617
12.62%
11.62%
10.81%
6.05%
5.88%
4.52%
1.26%
1.12%
1.12%
1.01%
0.98%
0.96%
0.83%
0.79%
0.73%
0.72%
0.50%
0.43%
0.39%
0.38%
62.72%
ORDINARY SHARES
NUMBER HELD
PERCENTAGE
37,296,782
26,144,340
20,552,855
11.94%
8.37%
6.58%
Every member present at a meeting of the Company in person or by proxy shall have one vote and upon a poll each share shall
have one vote.
124
A U S D R I L L A N N U A L R E P O R T 2 0 1 6
F I N A N C I A L TA B L E
REVENUE
Sales revenue (from continuing operations)
Interest received
Total
PROFIT/(LOSS)
EBITDA*
Depreciation and amortisation expense
EBIT*
Net interest expense
Operating profit before income tax*
Impairment expense
Profit / (loss) before income tax
Income tax expense / (benefit)
Profit / (loss) from discontinued operations
Profit / (loss) for the year
Number of ordinary shares at year end
Weighted number of ordinary shares
Basic earnings / (loss) per share
Diluted earnings / (loss) per share
STATEMENT OF FINANCIAL POSITION
Total assets
Total liabilities
Shareholders' equity
Net tangible assets per share
12
13
1,059,107
3,134
1,062,241
1,128,559
2,724
1,131,283
288,436
116,144
172,292
19,805
152,487
-
152,487
40,280
-
112,207
304,397
302,935
37.3
37.0
272,746
123,695
149,051
39,548
109,503
(47)
109,456
19,057
-
90,399
312,277
308,173
29.6
29.0
14
826,305
1,555
827,860
173,656
99,177
74,479
40,049
34,430
(77,893)
(43,463)
396
-
(43,859)
312,277
312,277
(13.6)
(13.6)
15
719,832
1,828
721,660
110,793
73,598
37,195
35,131
2,064
(184,244)
(182,180)
(21,866)
(15,306)
(175,620)
312,277
312,277
(56.2)
(56.2)
16
743,899
1,632
745,531
126,378
68,009
58,369
32,064
26,305
(1,485)
24,820
4,581
37,911
58,150
312,277
312,277
18.6
18.2
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
000's
000's
CENTS
CENTS
$'000
$'000
$'000
DOLL AR
1,342,615
601,854
740,761
2.33
1,539,396
722,010
817,386
2.39
1,367,736
615,568
752,168
2.37
1,130,034
576,741
553,293
1.77
1,150,381
543,785
606,596
1.94
CASH FLOWS
Gross cash flows from operating activities
Net cash flows from operating activities
Net cash flows from investing activities
Net cash flows from financing activities
Closing cash balance
Gross debt
Net debt
$'000
$'000
$'000
$'000
$'000
$'000
$'000
205,407
156,784
(195,640)
23,551
124,188
363,941
239,753
263,966
187,290
(330,281)
93,328
78,826
537,456
458,630
192,371
142,117
(56,223)
(101,209)
62,695
453,311
390,616
138,486
117,936
(738)
(104,693)
77,865
433,789
355,924
123,158
91,006
60,853
(47,772)
181,857
398,540
216,683
DIVIDENDS
Total dividends per share (interim and final
declared)
Total dividends paid
CENTS
$'000
14.50
39,357
12.00
44,498
4.50
24,981
NET DEBT / TOTAL CAPITAL
EBIT TO SALES REVENUE
EMPLOYEES AT YEAR END
%
%
#
24
16.27
6,003
36
13.20
5,703
* EBITDA, EBIT and operating profit before income tax excludes impairment expense and discontinued operations.
34
9.01
1.00
9,369
39
5.17
-
-
26
7.85
4,578
4,080
3,841
F O L L O W U S AT
A U S D R I L L . C O M . A U
5
2
0
8
1
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