AUSDRILL
ANNUAL
REPORT
2017
——
BRINGING MORE
TO MINING
30% OF THE WORLD’S
REMAINING MINERAL
RESOURCES ARE
IN AFRICA
——
Operating and financial review
Financial report
Directors’ report
Auditor’s Independence Declaration
Corporate governance statement
Consolidated statement of profit or loss
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors’ declaration
Independent auditor’s report
Shareholder information
Financials table
06
25
26
42
43
44
45
46
47
48
49
117
118
127
128
II
Cover image: Abigail Gnamien, Maintenance Clerk, Iduapriem, GHANA
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW ——XXX 30% OF THE WORLD’S
REMAINING MINERAL
RESOURCES ARE
IN AFRICA
THAT’S WHY WE’RE HERE
01
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW ——XXX AFRICA IS THE GROWTH STORY
——
Our African business above and below ground
$6.5B
IN REVENUE OVER
27 YEARS
52%
OF GROUP
REVENUE
97 %
NATIONAL
WORKFORCE
EXCEPTIONAL PIPELINE
OF OPPORTUNITIES
THE MOST MINERAL-RICH CONTINENT IN THE WORLD
Africa is richly endowed with mineral reserves and over 30% of
the world’s mineral resources. It ranks as first or second in world
reserves of bauxite, cobalt, industrial diamonds, phosphate rock,
platinum-group metals, vermiculite and zirconium.
Gold mining is Africa’s main mining resource and represents 21%
of the world’s resource, across South Africa, Ghana, Tanzania and
Mali. 27% of the world’s bauxite reserves are in Guinea. The Group
operates in all of these jurisdictions.
WE’VE BUILT A TRULY AFRICAN MINING
SERVICES BUSINESS
We are now Africa’s largest mining contractor, operating in
8 countries.
With 27 years of operational expertise, we have the enviable
record of having trained over 20,000 African employees. We are
committed to the development of the communities in which we
operate and delivering inter-generational change.
We currently employ over 3,000 people over 15 projects.
97% of our African business employees are nationals.
CONTR ACT SURFACE MINING
$405M
REVENUE
$49M
EBIT
15
CONTRACTS
02
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW REVENUE A$’000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
AUMS2
AMS1
4
9
9
1
5
9
9
1
6
9
9
1
7
9
9
1
8
9
9
1
9
9
9
1
0
0
0
2
1
0
0
2
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
1
0
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
1
6
0
2
7
1
0
2
1
2
Includes AMSG Joint venture revenue from FY98 to FY05.
100% AUMS Joint Venture revenue
CONTRACTOR OF CHOICE FOR AN OUTSTANDING
CLIENT BASE
We are the contractor of choice for many blue chip clients.
Our client base includes an exceptionally diverse pool of clients
with outstanding mining projects including AngloGold Ashanti,
Newmont Ghana Gold, Perseus Mining, Endeavour Mining,
Resolute Mining, Hummingbird Resources, Toro Gold, Roxgold,
SEMAFO, Nordgold and Ghana Manganese Company.
Through AMS and AUMS we can offer the full suite of underground
and surface mining services.
BEST POSITIONED FOR AFRICA’S GROWTH STORY
The pipeline of growth opportunities in Africa is exceptionally strong.
We are best-positioned to deliver projects in Africa. Our track-
record in safety, high speed underground development, low-cost
and efficient surface mining is outstanding.
Our work winning rate is testament to the value we offer to
our clients.
Our mining fleet is extensive and interchangeable across projects
which means we are adaptable and can offer maximum flexibility
for our clients.
CONTR ACT UNDERGROUND MINING
1
$90M
REVENUE
1
$20M
EBIT
4
CONTRACTS
1 50% share of Joint Venture revenue and EBIT
03
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW AUSTRALIA – FROM HUMBLE BEGINNINGS
——
It’s in our DNA to do more
776M
14
GROUP
REVENUE
INTEGRATED MINING
SERVICES BUSINESSES
30
YEARS IN
OPERATION
4,500+
EMPLOYEES ACROSS
10 COUNTRIES
30 YEARS BRINGING MORE TO MINING
Managing Director, Ron Sayers established Ausdrill in 1987
with a single drill rig operating from Kalgoorlie in Western
Australia. By 1990, the company had expanded its drilling
operations into Africa, and two years later added contract mining
to its service portfolio.
Humble beginnings for a company which now generates almost
$800 million of turnover and employs over 4,500 people
across 10 countries. With 30 years of service and experience,
the Company now delivers services through 14 integrated
businesses, across every stage of the mining lifecycle in both
surface mining and underground.
Historically, Australia has been the backbone of our business.
Today, more than half of our revenue comes from our African
businesses.
As the Group continues to grow, underground mining will become
an increasingly important part of our earnings, through our AUMS
joint venture. The pipeline of new projects in Africa is exceptional
and the group is well positioned to pursue this growth – the outlook
for the company is bright.
OUR EXPERT CAPABILITY
Ausdrill is a production focussed mining services group.
Our capabilities include:
• Production Drilling and Blasting
• Underground Mining
• Exploration Drilling
• Grade Control Drilling
• Load and Haul
• Equipment Hire
• Supply and Logistics
DRILLING SERVICES
$216M
REVENUE
$19M
EBIT
12
CONTRACTS
04
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW As the Group continues to grow, underground mining will become
an increasingly important part of our earnings, through our AUMS
joint venture. The pipeline of new projects in Africa is exceptional
and the group is well positioned to pursue this growth – the outlook
for the company is bright.
OUR EXPERT CAPABILITY
Ausdrill is a production focussed mining services group.
Our capabilities include:
• Production Drilling and Blasting
• Underground Mining
• Exploration Drilling
• Grade Control Drilling
• Load and Haul
• Equipment Hire
• Supply and Logistics
Our equipment
553
SURFACE
MINING
80
UNDERGROUND
MINING
275
DRILL
RIGS
WE WOULDN’T BE HERE WITHOUT YOU
HONOURING THE LIFEBLOOD
30 years in business with KCGM, 23 years with Gold Fields.
The Group knows the value of long-standing relationships with
its clients. We have partnered with an ever-increasing list of the
world’s largest and most reputable mining houses over the past
30 years. We have supported our clients, both large and small
along the way through our drill for equity program, our local know-
how in new geographies and most importantly through our quality
service offering.
We recognize the importance of collaboration in delivering our
clients’ growth ambitions and we pride ourselves on working
closely with the mining community to achieve great results for
our collective stakeholders. We thank our valuable clients and
suppliers, past, present and future. Without your investment in our
industry – we simply wouldn’t be here.
Our people are the lifeblood of our business. We celebrate our
30 years in operation by honouring those who have provided the
most loyal of service to the development of the integrated mining
services Group we see today.
Our 25 years service award recipients are: Ron Sayers, Brian
Mann, Bill Jackson, George Grljusich, Kevin Phipps, James
Crawford, Clifford Robertshaw, John Geary and Phil Crompton.
We thank all of our Ausdrill family both past and present for making
Ausdrill a great business with an exciting future ahead of it.
EQUIPMENT, SERVICES & SUPPLIES
$131M
REVENUE
$9M
EBIT
200+
FLEET FOR HIRE
05
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW OPERATING AND FINANCIAL REVIEW
——
HIGHLIGHTS
PRINCIPAL ACTIVITIES
• Continuous improvement in safety performance across
the Group.
• Strong financial performance delivering exceptional profit
growth of 53.3% from continuing operations.
• Revenue of $776.3 million – up 4.5%.
• Reported profit of $31.2 million and EPS of 10.0 cents per share.
• Commitment to shareholders with interim fully franked dividend
of 2.0 cents paid totalling $6.2 million. Final fully franked
dividend of 2.0 cents per share declared.
• $1.6 billion in new projects and contract renewals secured.
• Margins continue to improve in a competitive market, through
cost-out and scale benefits.
• Major investment in growth capex, funded out of strong
operational cashflow generation and cash reserves.
• Operating cash flow of $94.6 million in challenging market.
• Significant financial flexibility – cash reserves of $166.7 million
and gearing at 26%.
• Long-standing exposure to low-cost gold sector continues to
provide a core source of revenue, with ~80% of revenue linked
to gold producers in Australia and Africa. Secured projects
expected to contribute to profit growth in FY18.
• Exceptional tender pipeline – Africa will drive earnings growth
beyond FY18.
Ausdrill (Company or Group) has invested in people, businesses
and equipment over the past 30 years to ensure it can successfully
deliver services across every stage of the mining lifecycle, with a
particular focus on production. It is a robust business model that has
delivered ‘through the cycle’ returns for shareholders and one which
management believes will continue to deliver in the years ahead.
In Australia, the Company’s service offering includes drill and
blast, grade control, water well drilling, exploration drilling, mineral
analytics and equipment sales, hire and parts sales. The Australian
operations are primarily based in Western Australia, with a presence
in Queensland, South Australia and New South Wales.
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. Ausdrill’s African operations are diversified across a
portfolio of clients and jurisdictions including Ghana, Mali, Burkina
Faso, Guinea, Senegal, Tanzania, South Africa and Zambia.
The Group provides specialist underground mining services,
including high speed decline development and production, through
its 50-50 joint venture with Barminco Limited, African Underground
Mining Services (AUMS).
Africa, in particular West Africa, offers exceptional opportunities for
business growth in both surface and underground mining.
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.
1,128.6
272.7
109.5
826.3
719.8
743.0
776.3
173.7
136.8
125.1
110.8
45.3
34.4
25.1
2.1
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
$776.3M
SALES REVENUE1
$136.8M
EBITDA1,2
$45.3M
OPERATING PROFIT BEFORE TAX1
1 Based on FY17 sales revenue from continuing operations excluding intercompany sales
2
Includes impairment of available-for-sale assets of $1.5 million in FY16
06
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW Other
Burkina
Mali
Guinea
Ghana
Australia
Other
Africa
Australia
THE FOLLOWING CHARTS SHOW THE PERCENTAGES OF SALES
REVENUE BY BUSINESS ACTIVITY AND BY GEOGRAPHY.
AUSDRILL REVENUE BY BUSINESS ACTIVITY1
AUSDRILL REVENUE BY GEOGRAPHY1
Manufacturing (1%)
Supply Logistics (1%)
Other (5%)
Exploration (10%)
Equipment Hire (17%)
Drill and Blast (17%)
Contract Mining Africa (49%)
Other (8%)
Exploration (10%)
COUNTRY
SECTOR
BUSINESS ACTIVIT Y
SECTOR
Contract Mining Africa
52.0%
Drill and Blast
Equipment Hire
Exploration
Other
Supply Logistics
Manufacturing
16.2%
14.8%
12.0%
2.5%
2.1%
0.4%
Production
83.0%
Production (82%)
Exploration
12.0%
Other
5.0%
Australia
Ghana
Guinea
Mali
Burkina
Other
46.4%
29.6%
9.8%
8.0%
4.6%
1.6%
Africa
52.0%
Australia
46.4%
Other
1.6%
REVENUES SHOWN IN THE CHARTS BELOW ARE FOR THE YEAR ENDED 30 JUNE 2017 (F Y17) FOR CONTINUING OPER ATIONS AND
AFTER INTER-SEGMENT ELIMINATIONS.
CONTRACT MINING
SERVICES AFRICA
DRILLING SERVICES
AUSTRALIA
EQUIPMENT SERVICES
& SUPPLIES
ALL
OTHER
$405M
REVENUE1
52%
$216M
REVENUE1
28%
$131M
REVENUE1
17 %
1 Based on FY17 sales revenue from continuing operations excluding intercompany sales
$25M
REVENUE1
3%
07
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW OPERATING AND FINANCIAL REVIEW
——
The Group’s strategy is to deliver quality services to the mining industry. Accordingly, Ausdrill has built long-term relationships
with many of the world’s leading resource companies such as AngloGold Ashanti, BHP Billiton, Barrick, Newmont Ghana Gold
and Gold Fields, which, in some instances, extend over more than 25 years. The Company also nurtures new opportunities with
less established customers through innovative approaches including drill for equity programs.
For the year ended 30 June 2017, approximately 80% of mining services revenues were generated from the provision of
services to gold mining companies and approximately 7% to iron ore mining companies, in each case, primarily for
production-related services.
GROUP FINANCIAL PERFORMANCE
$ 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
1 Includes impairment of available-for-sale assets of $1.5 million
17
16
% CHANGE FROM PRIOR
CORRESPONDING PERIOD
776.3
136.8
74.4
45.3
31.4
(0.2)
31.2
743.0
125.11
57.2
25.1
20.5
37.6
58.2
4.5%
9.4%
30.3%
80.6%
53.3%
(100.6%)
(46.3%)
REVENUE
EARNINGS FROM CONTINUING OPERATIONS
EBITDA increased from $125.1 million to $136.8 million for the
year ended 30 June 2017. The major drivers of the increase were
exceptional operational performance and growth of the African
surface mining and underground portfolios. Equity accounted
profits delivered through AUMS increased from $9.1 million in 2016
to $13.1 million in 2017.
EBITDA margin (excluding equity accounted profits) increased
from 15.6% to 15.9%. Excluding losses from the now exited Telfer
project, the EBITDA margin would have increased to 16.3%. The
EBITDA margin has been positively impacted by growth in Africa
and cost-out and restructuring activities across the Group. All costs
associated with the exit of the Telfer contract have been brought to
account within the reporting period.
EBIT (from continuing operations) increased from $57.2 million
to $74.4 million for the year ended 30 June 2017 and the EBIT
margin (excluding equity accounted profits) has increased from
6.5% to 7.9%. Excluding losses from the now exited Telfer project,
the EBIT margin would have increased to 8.3%.
The operating profit before tax from continuing operations increased
from $25.1 million to $45.3 million for the year ended 30 June 2017
aided by lower debt levels and lower net interest expense.
The reported profit after tax from continuing operations for the year
totalled $31.4 million, an increase of 53.3% on the $20.5 million
reported in 2016.
The prior period included profits from discontinued operations along
with profit on the sale of the DTA business totalling $37.6 million.
The Group reported a small loss from discontinued operations in
the current period and reported profit after tax of $31.2 million.
Sales revenue from continuing operations for the Group increased
4.5% to $776.3 million. Revenue growth was driven by the African
Mining Services segment, where revenues increased by 11.8%
following the start up of the Esuajah North project. The Equipment
Services & Supplies segment delivered 18.3% in revenue growth
(including $48.2 million from internal sales). Much of this growth
was focussed on mobilising newly awarded projects in Africa.
Drill and blast activities in the Drilling Services Australia segment
grew through the ramp-up of a number of major contracts.
However, this was offset by lower levels of water well activity.
Reported sales revenue excludes Ausdrill’s 50% share of revenue
generated by the AUMS joint ventures being $89.9 million (2016:
$76.6 million). AUMS is equity accounted and only Ausdrill’s 50%
share of net profits are included in the consolidated income statement.
Four new projects, which were secured during the period have now
been mobilised and will deliver significant growth in FY18.
EXPENSES
The Group’s three largest expense categories are materials, labour,
and depreciation and amortisation which represent 85.3% (2016:
82.2%) of all expenses.
Materials expense increases were driven by major component
change outs and higher maintenance costs to bring idle gear back
to work for new projects in Ghana and Burkina Faso.
Labour expenses increased by 4.7%, which was in line with the
increase in sales revenue. This was predominantly due to a 31%
increase in headcount in Africa to 2,791 (from 2,132) following the
start of new projects in the second half of FY17. This increase was
partially offset by a reduction in the Australian headcount from
1,257 to 1,079 employees.
Depreciation and amortisation expenses decreased by 8.1% or
$5.5 million, as a result of lower capital values.
08
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW
CONTRACT MINING SERVICES AFRICA
SEGMENT PERFORMANCE
EX TERNAL SALES
REVENUE
EARNINGS BEFORE
INTEREST AND TA X 1
2017
2016
404.7
361.9
2017
49.3
2016
38.9
$ MILLION
CMSA
1 EBIT excludes AUMS equity accounted profits
The Contract Mining Services Africa (CMSA) business has reported
11.8% increase in revenue, largely driven by increased mining
volumes within Ghana at Nzema, Iduapriem and the additional
contract at Edikan North, Syama in Mali and the commencement
of the Boungou project for SEMAFO in Burkina Faso, along with the
return to work of the exploration fleet across West Africa.
Reported EBIT margin improved significantly, driven mainly by
revenue scale increases and improved operational performance at
a number of sites.
AFRICAN MINING SERVICES (AMS)
The AMS business was highly focused on winning work and
succeeded in securing a good share of new tenders and contract
extensions during the year, with the commencement of these
projects outlined below.
In Ghana, AMS:
•
•
commenced a 42-month contract to provide surface mining
services to Perseus at its Edikan gold mine, Esuajah North deposit.
extended exploration drilling contracts for Resolute at the
Bibiani Gold Mine and for Cardinal Resources in the Upper East
Region of Ghana.
•
continued open pit contract mining at Iduapriem for AngloGold
Ashanti and Nzema for Endeavour Resources.
In Mali, AMS:
•
•
•
secured a new 36-month contract (with a 12-month option to
extend) to provide surface mining services to Hummingbird
Resources at its Yanfolila gold mine, currently under construction.
AMS has commenced civil works on site with open pit mining
scheduled to commence in August 2017.
continued exploration drilling with B2Gold at its Fekola gold project.
continued open pit contract mining at Syama for Resolute.
In Burkina Faso, AMS:
•
•
•
secured a new 60-month contract to provide surface mining
services to SEMAFO at its Boungou gold mine (formerly
Natougou), which commenced in May 2017.
secured a 12-month extension (with a 12-month option to
extend) to provide mining equipment to Nordgold for work
on its Bissa gold project.
extended exploration drilling contracts with B2Gold, West
African Resources and Vital Metals.
In Senegal, AMS:
•
secured a new 75-month contract to provide surface mining
services to Toro Gold Ltd at its Mako gold mine. The project
commenced in May 2017 with mining scheduled to commence
in August 2017.
• opened a new regional office in Dakar to support this new
contract and future work in the area.
In West Africa, AMS has increased its major mining equipment fleet
to over 400 units including dump trucks, excavators, loaders, blast
hole drills and grade control drills, along with 17 exploration drills.
Tender activity remains strong and AMS is seeing a lift in exploration
drilling programs, particularly in West Africa. The outlook remains
positive with significant revenue and profit growth expected in FY18
as AMS’s new contracts ramp up.
KEY CONTRACTS - CONTRACT MINING SERVICES AFRICA
The key contracts in place at 30 June 2017 for the Contract Mining Services Africa segment are:
LOCATION
SERVICES PROVIDED
CLIENT
B2Gold
B2Gold
West African Resources
Vital Metals
PROJECT
Fekola
Kiaka
Tanlouka
Zeko
Cardinal Resources
Bolgatanga
Mensin
Syama
Yanfolila
Edikan
Nzema
Iduapriem
Resolute
Resolute
Hummingbird Resources
Perseus
Endeavour
AngloGold Ashanti
SEMAFO
Toro Gold
Nordgold
Endeavour
Boungou (formerly Natougou)
Burkina Faso
Mako
Bissa
Karma
Senegal
Burkina Faso
Burkina Faso
Mali
Burkina Faso
Burkina Faso
Burkina Faso
Ghana
Ghana
Mali
Mali
Ghana
Ghana
Ghana
Exploration drilling
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
Open pit mining
Open pit mining
Equipment hire
Equipment hire
09
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW
OPERATING AND FINANCIAL REVIEW
——
AFRICAN UNDERGROUND MINING SERVICES (AUMS)1
In Ghana, AUMS:
SEGMENT PERFORMANCE
EX TERNAL SALES
REVENUE
EARNINGS BEFORE
INTEREST AND TA X
• was awarded a five-year contract to provide underground
mining services to Newmont Ghana Gold at its Subika
underground mine at the Ahafo complex in Ghana, which
commenced in May 2017.
$ MILLION
2017
2016
2017
2016
In Tanzania, AUMS:
AUMS
(Ausdrill 50% share)
89.9
76.6
19.8
18.2
1 AUMS is an equity accounted joint venture for reporting purposes
Ausdrill has a 50% interest in the AUMS joint venture, with
Barminco Limited 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 increased from
$76.6 million to $89.9 million in the year to June 2017, mainly due
to the commencement of the Subika project in Ghana for Newmont
Ghana Gold, the expansion of the Geita project in Tanzania for
AngloGold Ashanti and also the expansion of the Yaramoko project
for Roxgold in Burkina Faso. Earnings before interest and tax
increased from $18.2 million to $19.8 million (being Ausdrill’s 50%
share) in the year to June 2017. This is largely as a result of the
higher revenue in FY17, offset only partially by start-up costs on the
Subika project.
•
commenced mobilisation activities for the further expansion
of the Geita project in Tanzania, including works in the
Nyankanga pit.
In Burkina Faso, AUMS:
• demobilised from Nantou Mining’s Perkoa project in December
2016, with some infrastructure being sold to Nantou including a
portion of spares, parts, stock and mining consumables
Diamond drilling projects were also carried out in Ghana and Mali
during the year.
Further expansion is expected at all AUMS operations in FY18
being Subika, Geita and Yaramoko, which should provide a
significant increase in revenue in FY18.
KEY CONTRACTS - AFRICAN UNDERGROUND MINING SERVICES
The key contracts in place at 30 June 2017 for the AUMS joint venture are:
CLIENT
Roxgold
AngloGold Ashanti
AngloGold Ashanti
PROJECT
Yaramoko
Geita - Star and Comet
Geita – Nyankanga
Newmont Ghana Gold
Subika
LOCATION
SERVICES PROVIDED
Burkina Faso
Underground mining services
Tanzania
Tanzania
Ghana
Underground mining services
Underground mining services
Underground mining services
10
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW
DRILLING SERVICES AUSTRALIA
DRILL AND BLAST
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 through
the provision of grade control services.
SEGMENT PERFORMANCE
During the year, the business was successful in:
$ MILLION
DSA
EX TERNAL SALES
REVENUE
EARNINGS BEFORE
INTEREST AND TA X
2017
2016
215.5
222.6
2017
19.1
2016
21.1
Drilling Services Australia (DSA) has reported a solid result for
the year in stabilising market conditions. During the period, the
business has continued to focus on rationalisation and operational
efficiency improvements, along with extending existing contracts
and targeting new opportunities. EBIT margin, excluding the now
exited Telfer contract, increased to 10.2%.
Growth in exploration opportunities continued to emerge
throughout the period, although margins remain suppressed as
excess capacity in the industry is absorbed. In addition, unseasonal
weather conditions, particularly in the Goldfields and mid-west
regions, impacted earnings in this segment. Drill and blast works
remained stable producing the most significant contribution to
the segment. Second-half earnings, in particular, improved with
the exit of the loss-making Telfer project in February 2017, which
reported $2.6 million in losses for the period.
Looking forward, DSA will continue to focus on consolidation
initiatives and business development, which are expected to
deliver margin improvement and a more competitive platform for
the business in FY18.
•
•
•
•
securing a significant contract renewal with KCGM for five
years to provide drill and blast and grade control services at the
Kalgoorlie Super Pit, which commenced in March 2017.
securing a new five-year contract with Link Mining Services
to provide drill and blast services at the Blair Athol coal project
in Queensland.
extending contract terms at the Tropicana and Mungari projects.
adding short-term works with growth potential.
The business operates 138 rigs comprising production blast-hole
drills, purpose-built probe drills and reverse circulation (RC) grade
control drills.
EXPLORATION
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, servicing the North West of
Western Australia (Ausdrill Northwest (ANW)). These exploration
businesses operate 50 rigs comprising rotary air blast (RAB), reverse
circulation (RC) and diamond drill rigs, as well as 13 water well rigs.
During the year, the business was successful in securing a contract
extension with Gold Fields for three years to provide exploration
drilling services at the St Ives and Granny Smith gold mines, which
commenced in February 2017. Ausdrill has now been delivering
services to these projects for over 20 years and will extend this
relationship to 23 years with the extension of this contract.
Exploration drilling services were also provided to a range of clients
in the Pilbara, Mid-West and Goldfields regions including BHP,
Northern Star, Doray Minerals, Dacian Gold, Silverlake Resources
and Breaker Resources.
KEY CONTRACTS - DRILLING SERVICES AUSTRALIA
The key contracts in place at 30 June 2017 for the Drilling Services Australia segment are:
PROJECT
LOCATION
SERVICES PROVIDED
CLIENT
Gold Fields
St Ives and Granny Smith
Northern Star Resources
Kanowna Belle and Kundana
BHP Billiton
Evolution Mining
KCGM
Ensham Resources
Link Mining Services
OZ Minerals
Piacentini & Son
Piacentini & Son
Macmahon
Thiess
Several Pilbara mine sites
Mungari
Super Pit
Ensham
Blair Athol
Prominent Hill
Ravensthorpe
Huntly and Willowdale
Tropicana
Rocky’s Reward
Goldfields, WA
Goldfields, WA
Pilbara, WA
Goldfields, WA
Goldfields, WA
Emerald, QLD
Clermont, QLD
Exploration drilling, grade control
Exploration drilling
Exploration drilling, drill and blast, equipment hire
Exploration drilling, drill and blast, grade control
Production drilling, grade control
Production drilling
Drill and blast
Prominent Hill, SA
Drill and blast
Ravensthorpe, WA
Drill and blast
Huntly, WA
Goldfields, WA
Goldfields, WA
Drill and blast
Drill and blast
Drill and blast
11
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW
OPERATING AND FINANCIAL REVIEW
——
30 YEARS SERVICING THE
SUPER PIT IN K ALGOORLIE
12
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW
BTP Group’s business-wide Lean training program, which
commenced over a year ago, has begun to yield benefits.
This commitment to educating and up-skilling the workforce
is providing a platform for structured employee engagement,
collaboration, continuous improvement in productivity and safety
with better cost and quality outcomes. This cultural change journey
has been the right decision for the BTP Group at a time where there
is a current and foreseeable shortage of qualified skilled trades
entering the mining services workforce due to past cut-backs
driven by the protracted mining industry downturn.
One highlight in the past year was collaboration with African
Mining Services (AMS) where BTP was privileged to support the
AMS mining fleet capital expenditure program. This partnership
involved redeploying a portion of BTP’s excess idle rental fleet and
sourcing low cost used equipment for use in the AMS operations.
Another highlight related to securing a major rental contract
extension with Peabody Australia on the East Coast of Australia.
BTP is seeing a tightening in supply and availability of large mining
equipment and, consequently, an increase in rental equipment
fleet utilisation in Australia. The tightening of supply has resulted
in a return by BTP to procuring and rebuilding in-demand mining
and rental equipment which will result in a considerable increase in
capital expenditure in the future.
Moving forward, BTP Group’s strategy remains focussed on
extracting and delivering value to key stakeholders by harvesting
mining equipment lifecycle opportunities in Australia and Africa.
The non-OEM aligned equipment solution offering allows
BTP Group to build core business around the most attractive
opportunities that leverages core competencies. The near-term
objectives are to expand capacity and produce more product to
meet growing customer demand. The market is expected to remain
price sensitive and competitive.
SUPPLY DIRECT
Supply Direct Group (SDG) provides flexible and effective supply
chain and logistics solutions predominantly to clients based in
Africa, where supply chain issues are often complex. The business
has a track record of delivering customer value which has seen the
business continue to improve margins on lower sales levels and
therefore deliver flat earnings. Moving forward, SDG will integrate
with BTP Group as a designated distribution agent on the African
continent. This unique and mutually beneficial relationship will
provide SDG with a broader mining offering, whilst providing BTP
with greater distribution capability by leveraging SDG African
based infrastructure and resources. This relationship will provide
a platform for expanded growth for both SDG and BTP Group in
Africa in the medium to longer term.
EQUIPMENT, SERVICES & SUPPLIES
SEGMENT PERFORMANCE
EX TERNAL SALES
REVENUE
EARNINGS BEFORE
INTEREST AND TA X
2017
2016
130.7
131.0
2017
9.5
2016
7.5
$ MILLION
ESS
The Equipment, Services and Supplies (ESS) segment comprises
the BTP Group and Supply Direct Group. The ESS business
continued its focus on profitable revenue conversion, cost
and productivity outcomes to improve financial performance,
sustainability and competitiveness. External revenue remained flat
due to the higher demand for and consumption of internal resources
to mobilise fleet to new African projects. Revenue including sales
to internal customers increased by 18.3%. Consequently, external
EBIT and operating margins improved. Moving forward our priority
is to continue allocating resources to the highest yielding profitable
growth opportunities and investment in the business that will
enhance long term competitiveness and sustainability.
BTP GROUP
BTP Group is one of Australia’s largest non-OEM suppliers
of heavy earthmoving equipment solutions to the mining
and construction industries. BTP Group’s offering includes
maintenance and repair 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.
Past year achievements reflect underlying increases in mining
services maintenance activity and demand for large mining
equipment. This higher activity level drove improvement in
sales, operating earnings, growth in workforce numbers and has
vindicated BTP Group’s decision to return to investing in trade
apprenticeships. In addition to committing to workforce investment
and expansion, BTP Group recently committed to expanding its
workshop and rebuild capacity by leasing an equipment workshop
and yard property adjoining its Hazelmere facility in Western
Australia. Parts sales and rebuild activity levels for engines
and major components increased resulting in a commitment to
increasing capacity. With an ageing mining equipment population
plus the backlog of equipment maintenance that has built up in
recent years, continued sustainable market growth is anticipated.
The market remains competitive and building scale will assist
with improving financial returns. BTP Group’s commitment to
customers, employees and the mining industry is steadfast despite
ongoing pricing and margin pressure which is not expected to abate
anytime soon.
13
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW
OPERATING AND FINANCIAL REVIEW
ALL OTHER
SEGMENT PERFORMANCE
EX TERNAL SALES
REVENUE
EARNINGS BEFORE
INTEREST AND TA X
$ MILLION
All other segments
2017
25.4
2016
27.5
2017
0.3
2016
(5.0)
The All Other segment includes Diamond Communications,
MinAnalytical Laboratory Services, Energy Drilling Australia (EDA),
Well Control Solutions (WCS) and Ausdrill Properties.
The segment reported a significant improvement, reporting
earnings before interest and tax of $0.3 million. Major cost
reductions driven by placing the EDA business into care and
maintenance, drove most of the improvement, with all other
businesses recording modest improvements in reported profits.
DIAMOND COMMUNICATIONS
Diamond has experienced an improvement in revenue over the
second half of the year due to an increased workload through the
Telstra IEN with the installation of large civil projects in Western
Australia and South Australia.
Telstra HDA contracts are now under construction in Western
Australia, South Australia, Victoria and Queensland and are
progressing well. Diamond has also seen an increase in the Telstra
Wideband work, mainly in the rural and remote areas installing end
to end fibre.
Strong growth is still predicted through the NBN program of work that
Diamond is currently performing throughout the metropolitan area.
The business is well positioned to take on any new proposed
Western Power UPP contracts as they arise.
MINANALYTICAL LABORATORY SERVICES (MINANALYTICAL)
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.
Although operating in a highly competitive market, the combination
of the resurgence in gold exploration spending and careful
management of costs has allowed MinAnalytical to generate a
modest profit for the period.
MinAnalytical has invested in Chrysos Corporation’s photon assay
technology and will be working with Chrysos to commercialise this
potentially game changing, CSIRO-developed technology. The first
unit is expected to have completed commissioning and validation
by Q4 of FY18.
MinAnalytical commenced sample preparation in its Kalgoorlie
facility utilising repatriated plant from Africa on property already
owned by the Group. This expansion has gained the company
several high-profile customers in the Goldfields area, and has
produced a step increase in revenue levels.
ENERGY DRILLING AUSTRALIA (EDA)
As previously announced, Ausdrill has placed the oil and gas
assets of EDA into care and maintenance with the equipment
placed in storage, resulting in a reduction in overheads and
property costs.
The business will continue to incur depreciation, lease costs and
minimal labour costs, whilst Ausdrill looks to divest the equipment
at the appropriate time and value.
WELL CONTROL SOLUTIONS
The Company transferred the oil and gas assets from DTA which
were not included in the sale of DTA to Robit Plc, into a business
which trades as Well Control Solutions. This business provides
rental and maintenance of pressure control and pump products
for the oil and gas sector. To date, it has operated at a modest
profit, and more recently has seen an increase in activity in the
coal seam gas sector.
FOCUSING ON ITS CORE AC TIVITIES
14
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW ——
GROUP FINANCIAL POSITION
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.
CASH FLOWS
A summary of the cash flows for the Group is as follows:
$ MILLION
Cash flows from:
operating activities
investing activities
financing activities
Net cash flow for the year
0pening cash
Exchange rate effect on cash
Closing cash
17
94.6
(101.1)
(7.0)
(13.5)
181.9
(1.7)
166.7
16
91.0
60.9
(47.8)
104.1
77.9
(0.1)
181.9
Cash flows from operating activities
Operating cash flow for the year was $94.6 million, an increase on
last year’s $91.0 million. Operating cash flow benefitted from a prior
period cash settlement of USD16.2 million received in August 2016.
However, this was partially offset by a build-up in working capital for
new projects in Africa (including $8.3 million in mobilisation costs
which have been capitalised within prepayments) and higher tax
payments ($5.3 million higher) for profits being generated in Africa.
Cash flows from investing activities
The Group’s business requires significant investment in front-ended
capital expenditure for mining equipment to service new projects.
This equipment typically has a useful life of between seven and
ten years. Consequently, during periods of high or rapid growth,
the capital requirements of the Group increase. Historically, capital
expenditures have been funded by a combination of operating cash
flow, debt and equity.
Capital expenditure totalled $147.4 million for the period,
significantly higher than the prior period, driven mainly by growth
projects in Africa. As a result, the level of capital expenditure is
higher than the level of depreciation. Much of this investment was
made towards the end of the financial year and is expected to
deliver a significant increase in both revenue and earnings in FY18.
Further, the Group divested non-core businesses during 2016, for
which it received residual sales proceeds during the current reporting
period totalling $19.8 million from the sale of Drilling Tools Australia
(DTA) and $2.4 million from the sale of the Miner’s Rest business.
Proceeds from the sale of certain items of plant and equipment
which were surplus to operational needs totalled $1.8 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.
$ MILLION
Drilling Services Australia
Contract Mining Services Africa
Equipment Services & Supplies
Other
Proceeds from asset sales
CAPEX net of asset sales
17
(6.9)
(121.1)
(17.2)
(2.3)
1.8
(145.6)
16
(3.8)
(6.8)
(1.7)
(0.1)
11.4
(1.0)
From time to time, the Company 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 $3.9 million into drill for
equity work programs and other available-for-sale investments and
divested $3.2 million of shares acquired in drill for equity programs
and other available-for-sale investments. A profit on the sale of
shares acquired through these programs totalled $0.9 million.
Distributions from the AUMS joint venture totalled $22.9 million for
the year.
Cash flows from financing activities
Net financing cash outflows were $7.0 million in the year ended
30 June 2017, compared to an outflow of $47.8 million in 2016.
The Group’s continued focus on debt reduction has resulted in
$48.5 million of net debt repayments over the last two years.
The Group’s residual debt comprises its US$ bonds which mature
in November 2019. An interim fully franked dividend of $6.2
million was paid during the year.
Working capital
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
17
167.7
188.8
(100.4)
256.1
(22.2)
16
169.8
191.4
(82.8)
278.4
(5.7)
The Group’s year end working capital balance has reduced
materially. Settlement of prior period rate adjustments for the
Siguiri project and asset sales proceeds associated with the sale
of DTA, were only partially offset by increases in working capital
associated with new project mobilisations.
15
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW
OPERATING AND FINANCIAL REVIEW
Dividends
The following table shows net debt and gearing ratios.
The level of dividends is influenced by earnings and cash
requirements of the business. Historically, the Company has paid
fully franked dividends to its shareholders twice a year, in April and
October, at an average payout ratio of 40%. During the year ended
30 June 2017, the Company paid an interim fully franked dividend
of 2.0 cents per share.
The Company’s revenues have stabilised over recent reporting
periods and are expected to grow over the next six to 12 months
based on contracts already secured. Whilst uncertainty within
the mining services sector remains, the Company has delivered
improved profitability and strong cash flow in recent reporting
periods. Consequently, the Directors have elected to declare a final
fully franked dividend of 2.0 cents per share for the full year ended
30 June 2017.
Debt, gearing and other financing arrangements
At 30 June 2017, the Group had total borrowings of $388.6
million (including prepaid borrowing costs and insurance premium
funding). Cash and cash equivalents totalled $166.7 million,
resulting in net debt of $221.9 million. The Company’s gearing ratio
improved from 26.3% to 26.0%. It is worth noting that significant
investment in growth capex was made late in the reporting period
to service projects expected to deliver significant revenue and
earnings growth in FY18.
The Group had available a $125 million revolving cash advance
facility, of which $124.8 million was undrawn at 30 June 2017.
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.
$ MILLION
Revolving cash advance facility
Asset finance and other loans
US$300 million unsecured
notes
Insurance premium funding
and prepaid borrowing costs
Total borrowings
Cash and cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
Note: Columns may not add due to rounding
17
-
-
390.5
(1.9)
388.6
(166.7)
221.9
630.1
852.0
26.0%
16
-
0.5
402.3
(4.2)
398.5
(181.9)
216.7
606.6
823.3
26.3%
The US$ 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$0.7682
and, as a result of the strengthening A$ over the year, an amount
of $11.8 million has been included in the foreign currency
translation reserve in relation to borrowings. This gain is 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.
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.
Ausdrill’s debt structure provides the necessary liquidity for its
operations and the maturity profile is set out below, including the
cash advance facility of $125 million expiring 2018.
16
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW —— Balance Sheet
Cash and cash equivalents decreased by $15.1 million, primarily
due to the significant investment made in growth capital
expenditure for new projects in Africa, which were cash funded.
Proceeds from the sale of DTA and Miner’s Rest totalling $22.2
million were received during the reporting period.
Trade and other receivables decreased by $2.1 million or 1.2% to $167.7
million and include prior period cash settlements of Siguiri project back
claims of US$16.2 million and DTA business sale of $19.8 million,
but were partially offset by working capital increases associated with
mobilisation and start-up of new projects in Africa.
Inventories decreased by $2.6 million or 1.4% to $188.8 million
mainly driven by reductions across all operational businesses,
partially offset by stock-in-transit to new projects in Africa.
The net value of Property, Plant and Equipment increased by
$70.6 million due to the investment in capital expenditure for
growth projects in Africa. Capital expenditure totalled $147.4 million
and included expenditure in Africa of $121.1 million. This was offset
by depreciation charges totalling $62.4 million, disposals of $7.9
million and exchange and other movements totalling $6.5 million.
Trade and other payables increased from $82.8 million to
$100.4 million, as projects in Africa ramped up.
The net debt of the Group (debt including prepaid borrowing costs
and insurance premium funding less cash) increased marginally
from $216.7 million at 30 June 2016 to $221.9 million at 30 June
2017. Capital expenditure was funded out of operating cash flow
and cash reserves, reducing the cash balance marginally. The
gearing ratio has improved from 26.3% to 26.0%.
Total drawn borrowings (excluding prepaid borrowing costs and
insurance premium funding) of $390.5 million, decreased by $11.8
million, mainly due to favourable exchange rate movements
Employee obligations of $41.8 million increased by $6.8 million
driven mainly by the addition of 741 employees across the Group to
deliver expected growth in FY18.
Shareholder equity increased to $630.1 million from $606.6 million.
During FY17 the Group achieved a profit of $31.2 million and paid an
interim dividend of 2 cents per share totalling $6.2 million.
The return on average capital employed increased to 8.6% for the
year to 30 June 2017 compared to 6.5% 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 Group made a major investment in capex, mainly funded out
of strong cashflow generation and cash reserves. The balance
sheet of the Group remains strong with gearing levels (net debt to
net debt plus equity) of 26.0%, cash reserves of $166.7 million and
interest cover (EBITDA/Net Cash Interest) of 4.7 times and with all
debt covenants containing significant headroom. The net assets
of the Group increased by $23.5 million to $630.1 million during
the year, resulting in the net tangible asset position increasing from
$1.94 per share to $2.02 per share. The Group maintains financial
flexibility for growth through its cash reserves, its committed lines
of funding and strong access to capital markets.
17
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW OPERATING AND FINANCIAL REVIEW
18
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW —— PEOPLE
As at 30 June 2017 the number of employees within the Group,
including jointly owned entities, stood at 4,582, up from 3,841 in
June 2016, an increase of 19.3%.
Managing human resources within the mining sector remains a
key challenge for the business. The demand for skilled labour
is increasing in response to improved commodity prices and an
increase in exploration expenditure, particularly within the gold
sector. Labour cost challenges are expected to impact the Group as
competition for resources increases.
The Group’s strategy to divest non-core businesses, a move
towards a shared services model for finance and administration
services and natural attrition have contributed to a 6% decrease in
Australian employee numbers.
Contract wins have contributed to an increase of 30.1% in the
workforce for our African operations with 3,503 employees as at
30 June 2017, up from June 2016 numbers of 2,693.
People management will continue to be key to the success of the
Ausdrill Group as it aligns human capital with its business goals.
The Group’s past and current success, together with future
expectations contribute to the strong and unique organisational
culture that makes Ausdrill successful. Through continuous
improvement, cross-functional collaboration, cultural alignment
and the retention of key personnel, Ausdrill will continue to have a
distinct competitive advantage in a challenging climate, through its
human resources.
6,003
5,703
4,578
4,080
3,841
4,582
JUN 12
JUN 13
JUN 14
JUN 15
JUN 16
JUN 17
HEALTH, SAFETY, ENVIRONMENT,
QUALITY AND TRAINING
Ausdrill’s commitment to the safety and wellbeing of its
employees, contractors and visitors is a core value of the business.
The Group continues to improve its health and safety performance,
with the focus on the engagement of its people, as they plan and
carry out their work with safety success in mind.
This continued engagement has resulted in a 9% reduction in
the Total Recordable Injury Frequency Rate (TRIFR) and a 6%
reduction in the number of work related incidents despite an
increase of 11% in the number of hours worked on the previous year.
Health and Safety roles and responsibilities training for managers and
supervisors has continued and now includes senior members of work
crews. This training will continue across the Group during 2018.
Three in-house safety awareness videos have been produced
using members of the Ausdrill workforce. These videos allow the
Group’s people and members of their family to tell their stories,
including a message for the audience regarding how prevention of
injuries and taking care of your health is vital.
The roll out of the first of these videos has begun and has received
positive feedback from work crews, members of the management
teams and clients, with several clients requesting a viewing for their
own people.
STATISTICS
The year has seen an improvement in safety performance across
the group and whilst the Lost Time Injury Frequency Rate has risen
slightly, the Total Recordable Injury Frequency rate continues to fall.
20
15
10
5
0
DEC 13
JUN 13 DEC 14
JUN 14 DEC 15
JUN 15 DEC 16
JUN 17
12 MONTH ROLLING LTIFR
12 MONTH ROLLING TRIFR
19
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW
OPERATING AND FINANCIAL REVIEW
GROUP BUSINESS STRATEGIES AND PROSPECTS
FOR FUTURE YEARS
STRATEGIES
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.
Ausdrill’s longer term strategy is to further strengthen its market
position in the mining services industry in Australia and Africa by:
PROSPECTS
Focusing on its core services — Ausdrill will 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 continues 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 by utilising this strategy in Africa and believes that this
strategy is an effective way to strengthen client relationships and
provide growth opportunities.
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.
RISKS
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.
LEVEL OF NEW MINING SERVICES CONTRACTS
AND CONTRACT RENEWALS
Mining services provided under contracts represent a large portion
of revenues for services provided for contract mining, drill and 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.
Consequently, results from operations are affected by the number of
new contracts the Group commences 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.
20
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW ——
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.
PRODUCTION LEVELS AT CLIENTS’ MINES
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 high relative to long-term
averages. 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.
In the year ended 30 June 2017, approximately 80% of mining
services revenues were generated from the provision of mining
services to gold mining companies and approximately 7% 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, Newmont Ghana Gold,
Endeavour, Gold Fields, OZ Minerals, Resolute, Perseus, Toro
Gold, Roxgold and SEMAFO. 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. In the coal sector, the Group’s
largest client is Peabody.
21
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW OPERATING AND FINANCIAL REVIEW
SCALE OF OPERATIONS AND MIX OF ACTIVITIES
INCREASED RISK OF DOING BUSINESS IN AFRICA
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.
UNINSURED RISKS
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.
The scale of operations and the mix of activities that the Group
undertakes 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.
CURRENCY FLUCTUATIONS
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 and Euro 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 will 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.
LABOUR COSTS AND AVAILABILITY
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).
22
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW —— OUTLOOK5
GOLD PRICE CHART (US$/A$)
1900
1700
1500
1300
1100
900
700
500
0
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 strong
competition in an environment which is showing evidence of
stabilisation in Australia and rapid growth in Africa.
In response to these market conditions, Ausdrill will:
• Maintain its strong focus on safety
• Focus on securing a significant share of attractive projects with
high quality clients
• Continue to deliver efficiency gains to counter market driven
margin pressures
• Rationalise its businesses to focus on profitable revenue streams
• Maintain a stable financial foundation from which to grow the
Company in the future
• Continue to review working capital, to ensure that it is
commensurate with current levels of activity
• Restrict capital expenditure to replacement needs or identified
growth opportunities
• Pursue M&A opportunities which are complementary to its
existing business model or to industry rationalisation
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. Expenditure
in gold exploration is growing in response to sustained periods of
strong Australian Dollar gold prices.
Growth of the African businesses is expected to continue on the
back of unprecedented levels 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. Consequently,
Ausdrill is in a strong position to grow in its key markets in the
years ahead.
JUN
06
JUN
07
JUN
08
JUN
09
JUN
10
JUN
11
JUN
12
JUN
13
JUN
14
JUN
15
JUN
16
JUN
17
GOLD (US$)
GOLD (A$)
Notes:
1. Non-IFRS Financial Information
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.
23
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW
AUDITOR
PwC
Level 15, 125 St George’s Terrace
Perth Western Australia 6000
SOLICITORS
Johnson Winter & Slattery
Level 4, 167 St George’s Terrace
Perth Western Australia 6000
Herbert Smith Freehills
Level 42, 101 Collins Street
Melbourne Victoria 3000
STOCK EXCHANGE LISTINGS
Ausdrill Limited shares are listed on the Australian Stock
Exchange.
ASX CODE: ASL
WEBSITE
www.ausdrill.com.au
DIRECTORS
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
SECRETARY
Efstratios Vassilios Gregoriadis
CHIEF FINANCIAL OFFICER
Theresa Mlikota
PRINCIPAL REGISTERED OFFICE IN AUSTRALIA
6 - 12 Uppsala Place
Canning Vale Western Australia 6155
SHARE REGISTER
Computershare Investor Services Pty Ltd
Level 11, 172 St George’s Terrace
Perth Western Australia 6000
24
AUSDRILL ANNUAL REPORT 2017OPERATING AND FINANCIAL REVIEW FINANCIAL
REPORT
——
30 JUNE 2017
Directors’ report �������������������������������������������������������������������������������������������������26
Auditor’s independence declaration ������������������������������������������������������������42
Corporate governance statement ��������������������������������������������������������������� 43
Consolidated statement of profit or loss ���������������������������������������������������� 44
Consolidated statement of comprehensive income �������������������������������45
Consolidated statement of financial position ��������������������������������������������46
Consolidated statement of changes in equity ������������������������������������������47
Consolidated statement of cash flows ������������������������������������������������������� 48
Notes to the consolidated financial statements ���������������������������������������49
Directors' declaration �������������������������������������������������������������������������������������117
Independent auditor's report to the members �����������������������������������������118
Shareholder Information ������������������������������������������������������������������������������ 127
Financials table ����������������������������������������������������������������������������������������������� 128
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
ABN 95 009 211 474
6 - 12 Uppsala Place
Canning Vale Western Australia 6155
The financial statements were authorised for issue by the directors on
23 August 2017� The directors have the power to amend and reissue the
financial statements�
All press releases, financial reports and other information are available on
our website: www�ausdrill�com�au
AU S DR IL L A NNUA L R E P OR T 20 17
FIN A NC I A L R EP OR T
25
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 2017.
DIRECTORS AND COMPANY SECRETARY
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)
Ian Howard Cochrane (Deputy Chairman)
Ronald George Sayers (Managing Director)
Terrence John Strapp
Donald James Argent
Mark Anthony Connelly
Mark Andrew Hine
The company secretary is Efstratios Gregoriadis.
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 Domenic Santini who was a Company Secretary from the start of the financial year resigned from the Group on 10 March 2017.
DIVIDENDS - AUSDRILL LIMITED
Dividends paid to members during the financial year were as follows:
Interim ordinary fully franked dividend for the year ended 30 June 2017 of 2.0 cents (2016: nil) per fully
paid share paid on 31 March 2017
17
$’000
16
$’000
6,246
-
The directors have elected to declare a final ordinary fully franked dividend of 2.0 cents per share for the year ended 30 June 2017
(2016: $nil).
REVIEW OF OPERATIONS
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 2 to 24 of this annual report.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Mobilisation of African Mining Services Senegal Suarl’s Mako project commenced in October 2016 with drilling and mining works
commencing in May 2017.
African Mining Services Burkina Faso Sarl’s Boungou (formerly Natougou) project commenced in May 2017.
African Mining Services Mali Sarl’s Yanfolila project commenced in May 2017.
The Energy Drilling Australia (“EDA”) business completed the transfer of assets into care and maintenance in November 2016.
The Group entered into a sale agreement to sell the Miners Rest Motel business for $2.5 million which was completed on 21 September
2016. The Miners Rest Motel is reported as a discontinued operation in note 13 of this annual report.
There were no other significant changes in the state of affairs of the consolidated entity during the financial year ended 30 June 2017.
EVENTS SINCE THE END OF THE FINANCIAL YEAR
On 23 August 2017, the directors declared the payment of a final ordinary fully franked dividend of $6,245,544 (2.0 cents per fully paid share) to
be paid on 18 October 2017 out of retained profits at 30 June 2017. The financial effect of this transaction has not been brought to account at 30
June 2017.
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.
26
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTDIRECTOR’S REPORT ——
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
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 2 to 24.
ENVIRONMENTAL REGULATION
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.
INFORMATION ON DIRECTORS
The following information is current as at the date of this report.
Terence Edward O’Connor AM QC LLB (WA). Non-executive Chairman. Age 79.
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 Elkington Bishop Molineaux Insurance Brokers Pty Ltd 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.
Mr Ian Howard Cochrane BCom, LLB. Non-executive Deputy Chairman. Age 63.
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 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.
27
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTDIRECTOR’S REPORT —— INFORMATION ON DIRECTORS (CONTINUED)
Ronald George Sayers. Managing Director. Age 65.
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.
Terrence John Strapp CPA, SF Fin., MAICD. Non-executive director. Age 73.
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 54.
Experience and expertise
Mr Mark Connelly was appointed as a non-executive director on 25 July 2012.
Mark Connelly has more than 30 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. Mark 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
Non-executive director and Chairman of Toro Gold plc since 2014.
Non-executive director of Saracen Mineral Holdings Limited since 2015.
Non-executive director and Chairman of West African Resources Limited since 2015.
Non-executive director of Cardinal Resources Limited since 2015 (resigned as Chairman 2016).
Non-executive director and Chairman of Tiger Resources Limited since 2016.
28
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTDIRECTOR’S REPORT —— INFORMATION ON DIRECTORS (CONTINUED)
Former directorships in last 3 years
Managing Director of Papillon Resources Limited from 2012 to 2014.
Non-executive director of Manas Resources Limited from 2013 to 2015.
Non-executive 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.
Donald James Argent BCom, CPA, FAICD. Non-executive director. Age 70.
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 until 2015.
Special responsibilities
None.
Interests in shares and options
40,000 ordinary shares.
Mr Mark Andrew Hine MAICD, MAusIMM. Non-executive director. Age 59.
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 in 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 at
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.
29
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTDIRECTOR’S REPORT —— MEETINGS OF DIRECTORS
The numbers of meetings of the Company's board of directors and of each board committee held during the year ended 30 June 2017 and
the numbers of meetings attended by each director were:
FULL MEETINGS OF DIRECTORS
AUDIT & RISK
REMUNER ATION
MEETINGS OF COMMITTEES
Terence Edward O'Connor
Ronald George Sayers
Ian Howard Cochrane
Terrence John Strapp
Donald James Argent
Mark Anthony Connelly
Mark Andrew Hine
A
7
7
8
8
8
7
7
B
8
8
8
8
8
8
8
A
3
*
*
4
*
4
*
B
4
*
*
4
*
4
*
A
2
*
*
*
*
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
REMUNERATION REPORT
The directors present the Ausdrill Limited 2017 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 27 to 29 for details about each director)
T E O'Connor
I H Cochrane
R G Sayers
T J Strapp
Other key management personnel
NAME
A G Broad
J Kavanagh
T Mlikota
R J Coates
D James
D J Argent
M A Hine
M A Connelly
POSITION
Chief Operating Officer - Australian Operations
Chief Operating Officer - African Operations
Chief Financial Officer
Executive General Manager - Australian Mining Operations
Executive General Manager - Equipment Services and Supplies
30
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTDIRECTOR’S REPORT —— REMUNERATION REPORT (CONTINUED)
(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 described below.
(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 management varies between $50,000 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.
31
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTDIRECTOR’S REPORT ——
REMUNERATION REPORT (CONTINUED)
(c) Elements of remuneration (continued)
Short-term performance incentives (continued)
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 incentive in exceptional circumstances. Any variation and the
reasons for it are disclosed.
As a result of improved performance during the year ended 30 June 2017, the Remuneration Committee and Board declared that 25% of the
service bonus be paid.
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).
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
32
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTDIRECTOR’S REPORT ——
REMUNERATION REPORT (CONTINUED)
(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 2017.
Revenue
Operating profit before income tax
Profit/(loss) after tax from continued operations
Profit/(loss) after tax from discontinued operations
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) from continuing
operations
Basic earnings/(loss) (cents per share) from discontinued
operations
Diluted earnings/(loss) (cents per share) from continuing
operations
Diluted earnings/(loss) (cents per share) from
discontinued operations
* Does not include impairment expense
17
$000
778,719
45,328
31,443
(242)
31,201
0.72
1.84
10.1
(0.1)
9.8
(0.1)
16
$000
744,635
26,578*
20,512
37,638
58,150
0.39
0.72
6.6
12.1
6.4
11.8
15
$000
721,660
2,064*
(160,314)
(15,306)
(175,620)
0.86
0.39
(51.3)
(4.9)
(51.3)
(4.9)
14
$000
827,860
34,430*
(43,859)
-
(43,859)
0.86
0.86
(13.6)
-
(13.6)
-
13
$000
1,131,283
109,503*
90,399
-
90,399
3.42
0.86
29.6
-
29.0
-
33
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTDIRECTOR’S REPORT —— REMUNERATION REPORT (CONTINUED)
(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
FIXED REMUNERATION
VARIABLE REMUNERATION
CASH
SAL ARY
$
NON-
MONETARY
BENEFITS
$
LONG
SERVICE
LEAVE
$
POST-
EMPLOYMENT
BENEFITS
$
SERVICE
BONUS *
$
OPTIONS
$
TOTAL
$
Executive directors
R G Sayers
Other key management
personnel
A G Broad 1
J Kavanagh
T Mlikota 2
R J Coates
D James
A J McCulloch 3
J E Martins 4
Total executive directors
and other KMP
Total non-executive directors
remuneration
Total KMP
remuneration expense
2017
2016
726,299
726,299
25,000
25,000
17,382
5,725
35,000
35,000
-
-
-
-
803,681
792,024
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
482,804
437,582
564,637
577,164
472,421
267,651
335,243
324,003
335,242
250,166
-
83,101
-
168,824
2,916,646
2,834,790
504,000
468,231
3,420,646
3,303,021
-
-
136,648
141,075
-
-
-
-
-
-
-
685
-
-
161,648
166,760
-
-
161,648
166,760
2,878
200
-
-
3,884
127
3,375
153
3,030
115
-
-
-
-
30,549
6,320
-
-
30,549
6,320
19,616
24,999
-
-
30,000
25,427
30,000
29,998
30,000
23,766
-
908
-
17,362
144,616
157,460
47,880
44,482
192,496
201,942
5,292
-
6,250
-
454
-
571
-
503
-
-
-
-
-
13,070
-
-
-
13,070
-
23,806
12,392
11,903
6,196
23,806
12,392
11,903
6,196
11,903
6,196
-
704
-
9,166
83,319
53,241
-
-
83,319
53,241
534,396
475,173
719,438
724,435
530,565
305,597
381,091
360,350
380,677
280,243
-
85,398
-
195,352
3,349,848
3,218,572
551,880
512,713
3,901,728
3,731,284
1
A G Broad was appointed as Chief Operating Officer Australian Operations on 3 August 2015.
2 Ms T Mlikota was appointed as Chief Financial Officer on 1 December 2015.
3 Mr A J McCulloch resigned as Chief Operating Officer Australian Operations on 10 July 2015.
4 Mr J E Martins resigned as Chief Financial Officer on 4 December 2015.
*
There will be no cash bonus payable for the year ended 30 June 2017. 25% of the service bonus has been accrued for the year ended 30 June 2017 and was paid
on 7 August 2017. There was no cash and service bonus accrued and paid for the year ended 30 June 2016.
34
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTDIRECTOR’S REPORT ——
REMUNERATION REPORT (CONTINUED)
(f) Contractual arrangements with executive KMP
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
3 and 12 months of termination by either party as noted below:
NAME
R G Sayers
Managing Director
A G Broad
Chief Operating Officer
- Australian Operations
J Kavanagh
Chief Operating Officer
- African Operations
T Mlikota
Chief Financial Officer
R J Coates
Executive General Manager
- Australian Mining Operations
D James
Executive General Manager
- Equipment Services & Supplies
* There are no additional contractual differences.
(g) Non-executive director arrangements
TERM OF
AGREEMENT
BASE SAL ARY
INCLUDING SUPER ANNUATION
TERMINATION BENEFIT*
Ongoing
761,299
Ongoing
477,420
Ongoing
533,328
Ongoing
477,420
Ongoing
340,242
Ongoing
340,242
Contract can be terminated by
either party with 12 months' notice
or payment in lieu.
Contract can be terminated by
either party with 3 months' notice
or payment in lieu.
Contract can be terminated by
either party with 3 months' notice
or payment in lieu.
Contract can be terminated by
either party with 3 months' notice
or payment in lieu.
Contract can be terminated by
either party with 3 months' notice
or payment in lieu.
Contract can be terminated by
either party with 3 months' notice
or payment in lieu.
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 revised 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. 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:
Base fees
Chairman
Deputy Chairman
Other non-executive directors
Additional fees
Audit and Risk Committee - Chairman
Remuneration Committee - Chairman
FROM 1 JULY 2015
$108,000
$90,000
$72,000
$9,000
$9,000
35
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTDIRECTOR’S REPORT —— REMUNERATION REPORT (CONTINUED)
(g) Non-executive director arrangements (continued)
Figure 2: Non-executive director remuneration
NAME
T E O'Connor
I H Cochrane
T J Strapp
D J Argent
M A Connelly
M A Hine
Total non-executive
director remuneration
(h) Additional statutory information
YEAR
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
BASE FEE
$
108,000
108,000
90,000
54,231
72,000
72,000
72,000
72,000
72,000
72,000
72,000
72,000
486,000
450,231
AUDIT
COMMITTEE
$
REMUNER ATION
COMMITTEE
$
SUPER-
ANNUATION
$
-
-
-
-
9,000
9,000
-
-
-
-
-
-
9,000
9,000
9,000
9,000
-
-
-
-
-
-
-
-
-
-
9,000
9,000
11,115
11,115
8,550
5,152
7,695
7,695
6,840
6,840
6,840
6,840
6,840
6,840
47,880
44,482
TOTAL
$
128,115
128,115
98,550
59,383
88,695
88,695
78,840
78,840
78,840
78,840
78,840
78,840
551,880
512,713
(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 34:
Figure 3: Relative proportion of fixed vs variable remuneration expense
NAME
Executive directors
R G Sayers
Other key management personnel of the Group
A G Broad
J Kavanagh
T Mlikota
D James
R J Coates
A J McCulloch
J E Martins
FIXED REMUNER ATION
AT RISK - STI
AT RISK - LTI *
17
%
16
%
17
%
16
%
17
%
16
%
100
100
95
97
96
97
97
-
-
97
99
96
98
98
99
95
-
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4
3
4
3
3
-
-
-
3
1
4
2
2
1
5
* 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.
36
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTDIRECTOR’S REPORT —— REMUNERATION REPORT (CONTINUED)
(h) Additional statutory information (continued)
(2) Performance based remuneration granted 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 year
2017
A G Broad
J Kavanagh
T Mlikota
R J Coates
D James
LTI OPTIONS
VALUE
GR ANTED
$
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
75th percentile
to be determined
to be determined
to be determined
to be determined
100%
100%
100%
0%
100%
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.
37
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTDIRECTOR’S REPORT —— REMUNERATION REPORT (CONTINUED)
(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 2017. All vested options were
exercisable.
2017
NAME & GR ANT
DATES
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
BALANCE AT THE START
OF THE YEAR
VESTED
FORFEITED
VESTED AND
EXERCISABLE
UNVESTED
GR ANTED AS
COMPENSATION
NUMBER
%
EXERCISED
NUMBER
%
BALANCE AT THE END OF THE
YEAR
OTHER
CHANGES
VESTED AND
EXERCISABLE
UNVESTED
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
38
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTDIRECTOR’S REPORT ——
REMUNERATION REPORT (CONTINUED)
(h) Additional statutory information (continued)
(4) Reconciliation of options and ordinary shares held by KMP (continued)
Figure 6: Shareholdings
2017
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
37,296,782
400,000
40,000
75,000
701,695
41,202
3,465
400,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(400,000)
1,004,285
37,296,782
400,000
40,000
75,000
701,695
41,202
3,465
-
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 or key management personnel of Ausdrill Limited or related entities during the current year.
(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 arm's length commercial
terms and conditions and is reviewed annually.
A director, Mr M A Connelly, was a director of B2Gold Corp and is currently the non-executive chairman of Toro Gold, West African Resources
and a non-executive director of 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.
Toro Gold through its subsidiary Petowal Mining Company entered into a mining services contract with an Ausdrill Limited subsidiary, African
Mining Services Senegal Suarl.
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 with mineral analysis
services by an Ausdrill Limited subsidiary, MinAnalytical Laboratory Services Pty Ltd. These services have been provided on arm's length
commercial terms and conditions.
39
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTDIRECTOR’S REPORT —— REMUNERATION REPORT (CONTINUED)
(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 and mining services
Mineral analysis services
(ii) Amounts recognised as expense
Rental office buildings
17
$
16
$
8,365,112
-
8,365,112
1,804,181
6,921
1,811,102
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
1,954,906
571,708
(7) Voting of shareholders at last year’s annual general meeting
In 2016, 98.28% 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.
SHARES UNDER OPTION
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
7 October 2013
7 October 2013
23 December 2015
23 December 2015
23 December 2015
7 October 2018
7 October 2018
23 December 2020
23 December 2020
23 December 2020
$1.70
$1.70
$0.25
$0.25
$0.25
1,966,654
1,966,692
3,299,982
3,299,982
3,300,036
13,833,346
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 2017 on the exercise of options granted under the Ausdrill
Limited Employee Option Plan. No further shares have been issued since that date.
INDEMNIFICATION
Under the Company’s constitution and subject to section 199A of the Corporations Act 2001, the Company indemnifies each of the directors,
the company secretary 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.
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
40
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTDIRECTOR’S REPORT ——
INDEMNIFICATION (CONTINUED)
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.
INSURANCE OF OFFICERS
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.
PROCEEDINGS ON BEHALF OF THE COMPANY
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.
NON-AUDIT SERVICES
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.
AUDITOR'S INDEPENDENCE DECLARATION
The auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 42.
ROUNDING OF AMOUNTS
The Company is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the 'rounding off' of amounts in the directors' report.
Amounts in the directors' report have been rounded off in accordance with the instrument 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
23 August 2017
41
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTDIRECTOR’S REPORT ——
AUDITOR’S INDEPENDENCE DECLARATION
42
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT —— CORPORATE GOVERNANCE STATEMENT
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 2017 corporate governance statement is dated as at 30 June 2017 and reflects the corporate governance practices in place throughout
the 2017 financial year. The 2017 corporate governance statement was approved by the Board on 23 August 2017. 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.
VOLUNTARY TAX TRANSPARENCY CODE
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. 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 notes 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; and
The Group's 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 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:
Take a conservative or low risk approach to tax planning and the assessment and management of tax risk;
1
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, software or automation to help manage tax compliance obligations;
9 Maintain open and constructive relationships with all relevant tax authorities; and
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, equipment and funding to its overseas operations on an arm’s-length commercial basis.
Refer to note 18 for additional information regarding transactions with related parties.
43
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Revenue from continuing operations
Other income
Materials expense
Labour costs
Rental and hire expense
Depreciation and amortisation expense
Finance costs
Realised foreign exchange gains/(losses)
Unrealised foreign exchange gains/(losses)
Other expenses from ordinary activities
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
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
17
$’000
778,719
7,206
(329,383)
(251,151)
(14,311)
(62,385)
(31,512)
719
4,028
(69,692)
-
13,090
45,328
(13,885)
31,443
(242)
31,201
31,201
31,201
16
$’000
744,635
11,102
(298,972)
(239,895)
(13,994)
(67,894)
(33,696)
(8,427)
(6,123)
(69,232)
(1,485)
9,074
25,093
(4,581)
20,512
37,638
58,150
58,150
58,150
CENTS
CENTS
10.1
9.8
10.0
9.7
6.6
6.4
18.7
18.2
NOTES
2
4(a)
4(b)
4(b)
4(b)
4(b)
4(b)
14(b)
5
13
21
21
21
21
The above consolidated statement of profit or loss should be read in conjunction with the accompanying notes.
44
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT —— CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
NOTES
8(b)
8(b)
8(b)
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
Share of other comprehensive income of joint ventures accounted for using the equity method
Items that will not be reclassified to profit or loss
(Loss)/gains on revaluation of land and buildings, net of tax
(Loss)/gain 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
17
$’000
31,201
882
(1,024)
(421)
(1,424)
(1,987)
29,214
29,214
29,214
29,456
(242)
29,214
16
$’000
58,150
(6,828)
1,960
(1,341)
1,178
(5,031)
53,119
53,119
53,119
15,481
37,638
53,119
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
45
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT —— CONSOLIDATED STATEMENT OF FINANCIAL POSITION
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
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
EQUITY
Contributed equity
Other reserves
Retained earnings
Capital and reserves attributable to owners of Ausdrill Limited
NOTES
6(a)
6(b)
7(a)
6(c)
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)
17
$’000
16
$’000
166,710
167,742
188,761
-
3,028
526,241
58,884
5,189
560,464
36,372
660,909
181,857
169,810
191,374
2,000
4,803
549,844
69,764
3,641
489,832
37,300
600,537
1,187,150
1,150,381
100,396
2,802
4,181
40,805
148,184
385,815
22,077
960
408,852
557,036
630,114
526,447
(17,777)
121,444
630,114
82,839
3,521
3,907
33,814
124,081
395,019
23,584
1,101
419,704
543,785
606,596
526,447
(16,028)
96,177
606,596
Total equity
630,114
606,596
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
46
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT —— CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
ATTRIBUTABLE TO OWNERS OF AUSDRILL LIMITED
CONTRIBUTED
EQUIT Y
$’000
OTHER
RESERVES
$’000
RETAINED
EARNINGS
$’000
NOTES
Balance at 1 July 2015
526,447
(11,181)
Profit for the year
Other comprehensive (loss)/income
Total comprehensive (loss)/income for the period
Transactions with owners in their capacity as owners:
Employee share options - value of employee services
8(b)
-
-
-
-
-
(5,031)
(5,031)
184
Balance at 30 June 2016
526,447
(16,028)
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)
-
-
-
-
-
-
-
(1,987)
(1,987)
-
238
238
38,027
58,150
-
58,150
-
96,177
31,201
312
31,513
(6,246)
-
(6,246)
TOTAL
$’000
553,293
58,150
(5,031)
53,119
184
606,596
31,201
(1,675)
29,526
(6,246)
238
(6,008)
Balance at 30 June 2017
526,447
(17,777)
121,444
630,114
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
47
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT —— CONSOLIDATED STATEMENT OF CASH FLOWS
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
Distributions received from associates
Net cash (outflow)/inflow from investing activities
Cash flows from financing activities
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
Net cash (outflow)/inflow from financing activities
Net (decrease)/increase 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
NOTES
9(a)
13
12(b)
6(a)
17
$’000
802,207
(670,096)
132,111
-
2,391
(29,113)
(11,782)
1,006
94,613
-
(147,418)
1,780
(3,855)
3,207
22,213
22,946
(101,127)
-
(471)
3,721
(6,246)
(3,969)
(6,965)
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)
(13,479)
104,087
181,857
(1,668)
166,710
77,865
(95)
181,857
-
-
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
48
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT —— NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 since the end of the financial year
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
50
51
54
55
58
59
60
66
73
75
76
77
77
84
85
86
89
92
93
93
93
94
95
97
99
100
101
102
105
106
49
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT —— HOW NUMBERS ARE CALCULATED
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
51
54
55
58
59
60
66
73
75
50
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1 SEGMENT INFORMATION
(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 including treasury, accounting, human resources and administration.
During the year, the Group embarked on a centralisation of accounts payable, accounts receivable and payroll for its Australian
operations. These costs are not distributed amongst the other segments.
Intersegment Eliminations:
Represents transactions which are eliminated on consolidation.
Discontinued operations:
This segment includes the discontinued operations of The Miners Rest Motel (2016: Drilling Tools Australia Pty Ltd and DT HiLoad
Pty Ltd). Information about discontinued businesses can be found in note 13.
51
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— -
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1
1
0
8
,
3
s
t
e
s
s
a
t
n
e
r
r
u
c
-
n
o
n
r
e
h
t
o
53
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ——
1 SEGMENT INFORMATION (CONTINUED)
(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 REVENUE
From continuing operations
Sales revenue
Sale of goods
Services
Other revenue
Interest
(a) Revenue recognition
17
$’000
776,328
2,391
778,719
16
$’000
743,003
1,632
744,635
17
$’000
16
$’000
25,396
750,932
776,328
2,391
778,719
32,117
710,886
743,003
1,632
744,635
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.
(iii) Other revenue
See note 25(e) for the recognition and measurement of other revenue.
54
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3
INDIVIDUALLY SIGNIFICANT ITEMS
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/(loss) on sale of discontinued operation
Reversal of impairment/(impairment) of assets
Plant and equipment - Drilling Tools Australia
Total material items from discontinued operations
Total
(a) Impairment of non-current assets
NOTES
13
13(b)
17
$’000
16
$’000
(64)
34,709
-
-
-
6,133
6,133
6,133
For the year ended 30 June 2017, 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 underutilisation 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,
Energy Drilling Australia, Kalgoorlie / Synegex and Contract Mining Services Africa 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 methodology (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
along with its own internal valuation where a fair value less costs of disposal has been used. 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 determine 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 CGU’s which had impairment triggers at 30 June 2017, some were assessed by a FVLCD method and some were via the
VIU method and resulted in no impairment charge being recorded. For the year ended 30 June 2016 the CGU’s were assessed by a
FVLCD method and resulted in no impairment charge 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 2017 and 30 June 2016.
55
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ——
3
INDIVIDUALLY SIGNIFICANT ITEMS (CONTINUED)
(a) Impairment of non-current assets (continued)
Summary of the impairment assessment
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
Manufacturing CGU
Total
TRIGGER FOR
IMPAIRMENT
TESTING
VALUATION
METHOD USED
IMPAIRMENT
EXPENSE/(REVERSAL)
OF PPE
17 16 17 16 17 16
Y
Y
N
Y
N
Y
-
N
Y
N
N
N
Y
-
VIU
-
FVLCD
FVLCD
-
VIU
-
-
-
-
FVLCD
FVLCD
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(6,133)
(6,133)
Key assumptions used for value in use calculations
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.
56
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3
INDIVIDUALLY SIGNIFICANT ITEMS (CONTINUED)
(a) Impairment of non-current assets (continued)
Kalgoorlie / Synegex CGU
This CGU is included in the Drilling Services Australia operating segment. At 30 June 2017, this CGU had triggers for impairment
testing, and a VIU methodology was adopted. Based on the impairment testing performed, no impairment expense has been
recognised at the CGU level at 30 June 2017. At 30 June 2016, there were no triggers for impairment requiring testing for this CGU.
Contract Mining Services Africa (CMSA) CGU
This CGU is included in the Contract Mining Services Africa operating segment. At 30 June 2017, this CGU had triggers for impairment
testing, and a VIU methodology was adopted. Based on the impairment testing performed, no impairment expense has been recognised
at the CGU level at 30 June 2017. At 30 June 2016, there were no triggers for impairment requiring testing for this CGU.
Key assumptions used for Fair Value less Costs of Disposal
Energy Drilling Australia (EDA) CGU
This CGU is included in the Other operating segment. At 30 June 2017, this CGU had triggers for impairment testing. To determine
the recoverable amount of this CGU, the Company engaged an independent external valuer to undertake a fair market valuation. The
valuation approach, a combination of Level 1, Level 2 and predominately Level 3 inputs in the fair value hierarchy, was employed
for this fair value valuation. The directors assessed the fair value of each asset, taking into account the independent valuation and
determined the assets’ fair value within a range of reasonable fair value estimates. As a result, no impairment charge was made as
the fair value valuation supported the carrying value. During the prior year, this CGU exhibited triggers for impairment testing and the
Company engaged an independent external valuer to undertake a fair market valuation (the same as that described above) resulting
in no impairment charge during the period ending 30 June 2016.
ANW CGU (previously ANW and Connector CGU)
This CGU is included in the Drilling Services Australia operating segment. At 30 June 2017, this CGU had triggers for impairment
testing. To determine the recoverable amount of this CGU, the Company engaged an independent external valuer to undertake a
fair market valuation. The valuation approach, a combination of Level 1, Level 2 and predominately Level 3 inputs in the fair value
hierarchy, was employed for this fair value valuation. The directors assessed the fair value of each asset, taking into account
the independent valuation and determined the assets’ fair value within a range of reasonable fair value estimates. As a result, no
impairment charge was made as the fair value valuation supported the carrying value. During the prior year, this CGU exhibited
triggers for impairment testing and the Company engaged an independent external valuer to undertake a fair market valuation (the
same as that described above) resulting in no impairment charge during the period ending 30 June 2016.
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.
57
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ——
17
$’000
-
2,209
1,006
934
3,057
7,206
1,629
60,756
62,385
68
29,045
2,399
31,512
3,630
6,987
16
$’000
3,666
1,370
888
2,044
3,134
11,102
1,801
66,093
67,894
379
30,489
2,828
33,696
-
6,258
(192)
919
-
1,485
(4,747)
14,550
4 OTHER INCOME AND EXPENSE ITEMS
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
Gain on sale of available-for-sale financial assets
Other
(b) Breakdown of expenses by nature
Depreciation
Buildings
Plant and equipment
Total depreciation
Finance costs
Hire purchase interest
Interest paid
Amortised borrowing cost
Finance cost expensed
Net loss on disposal of property, plant and equipment
Rental expense relating to operating leases
Impairment losses - financial assets
Trade receivables provisions
Impairment of other assets
Available-for-sale assets
Net foreign exchange (gains)/losses
58
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 5
INCOME TAX EXPENSE/(BENEFIT)
This note provides an analysis of the Group’s income tax expense, shows what tax 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 on profits for the year
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 discontinued operations before income tax expense
Tax at the Australian tax rate of 30% (2016 - 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Share of net (profit) of joint ventures
Other foreign permanent differences
Withholding tax
Gain on sale of investments
Other non-assessable/(non-deductible) items
Difference in overseas tax rates
Under/(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)
17
$’000
13,084
(998)
1,799
13,885
13,885
-
13,885
4,400
(5,398)
(998)
45,328
(242)
45,086
13,526
(3,927)
(734)
2,488
-
1,169
12,522
1,499
1,799
1,882
(5,833)
2,030
(14)
1,363
13,885
16
$’000
8,083
2,170
(911)
9,342
4,581
4,761
9,342
582
1,588
2,170
25,093
42,399
67,492
20,248
(2,722)
(3,737)
747
(4,109)
1,081
11,508
(429)
(911)
10,678
(11,973)
(2,155)
2,624
(2,166)
9,342
59
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— 5
INCOME TAX EXPENSE/(BENEFIT) (CONTINUED)
(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:
17
$’000
16
$’000
(412)
(402)
119,902
41,431
161,333
48,400
106,888
60,875
167,763
50,329
Undistributed earnings
Unrecognised deferred tax liabilities relating to the above temporary differences
116,070
9,159
95,164
7,417
Ausdrill Limited has undistributed earnings of $116,069,507 (2016: $95,164,000) 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) 2017 accounting effective company tax rates for Australian and global operations in terms of the Board of Taxations’
Voluntary Tax Transparency Code
(i) Australian operations
The accounting effective company tax rate for the year ended 30 June 2017 is 0% (30 June 2016: 3%). 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 30.0% (30 June 2016: 30.5%).
(ii) Global operations
The accounting effective company tax rate for the year ended 30 June 2017 is 30.8% (30 June 2016: 13.6%). This effective tax
rate is different to the Australian company tax rate due to the impact of different company tax rates in other countries, 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 33.8% (30 June 2016: 29.7%).
6 FINANCIAL ASSETS AND FINANCIAL LIABILITIES
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.
60
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED)
The Group holds the following financial instruments:
Financial assets
2017
Cash and cash equivalents
Trade and other receivables*
Available-for-sale financial assets
2016
Cash and cash equivalents
Trade and other receivables*
Available-for-sale financial assets
* Excluding prepayments.
** Fair value through other comprehensive income
Financial liabilities
2017
Trade and other payables
Borrowings
2016
Trade and other payables
Borrowings
NOTES
ASSETS AT
F V TOCI**
$’000
FINANCIAL
ASSETS AT
AMORTISED
COST
$’000
6(a)
6(b)
6(c)
6(a)
6(b)
6(c)
NOTES
6(d)
6(e)
6(d)
6(e)
-
-
5,189
5,189
-
-
5,641
5,641
166,710
151,969
-
318,679
181,857
162,206
-
344,063
LIABILITIES AT
AMORTISED
COST
$’000
100,396
388,617
489,013
82,839
398,540
481,379
TOTAL
$’000
166,710
151,969
5,189
323,868
181,857
162,206
5,641
349,704
TOTAL
$’000
100,396
388,617
489,013
82,839
398,540
481,379
The Group’s exposure to various risks associated with 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
17
$’000
16
$’000
166,710
181,857
(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
166,710
166,710
181,857
181,857
61
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— 6 FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED)
(b) Trade and other receivables
17
16
CURRENT
$’000
NON-CURRENT
$’000
TOTAL
$’000
CURRENT
$’000
NON-CURRENT
$’000
Trade receivables
Provision for impairment of receivables
(see note 11(b))
Other receivables (ii)
Prepayments
122,746
(14,361)
108,385
43,584
15,773
167,742
-
-
-
-
-
-
122,746
134,616
(14,361)
108,385
43,584
15,773
167,742
(14,726)
119,890
42,316
7,604
169,810
-
-
-
-
-
-
Further information relating to loans to related parties and key management personnel is set out in note 18.
TOTAL
$’000
134,616
(14,726)
119,890
42,316
7,604
169,810
(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 and accrued revenue. The 2016 amount included an amount recoverable
from a third party for damages sustained in a fire and the remaining outstanding amount payable by the Robit Plc Group of
$19,800,000, in relation to the sale of Drilling Tools Australia. Both of the amounts were received during the current year.
(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:
17
$’000
-
-
5,189
5,189
16
$’000
2,000
2,000
3,641
5,641
Current assets
Convertible note
Non-current assets
Equity securities
62
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED)
(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 (fair value through profit or loss, 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 (losses)/gains were recognised in other comprehensive income.
(Losses)/gains recognised in other comprehensive income
(iv) Non-current assets pledged as security
17
$’000
(2,034)
16
$’000
1,683
NOTES
8(b)
Refer to note 22 for information on non-current assets pledged as security by the Group.
(v) Fair value, impairment and risk exposure
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 Dollars 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
17
$’000
62,762
37,634
100,396
16
$’000
48,621
34,218
82,839
Trade payables are unsecured and are usually paid within 45 to 60 days of recognition.
The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature.
63
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— 6 FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED)
(e) Borrowings
Secured
Hire purchase liabilities
Total secured borrowings
Unsecured
USD notes
Prepaid borrowing costs
Insurance premium funding
Total unsecured borrowings
Total borrowings
17
16
CURRENT
$’000
NON-CURRENT
$’000
TOTAL
$’000
CURRENT
$’000
NON-CURRENT
$’000
TOTAL
$’000
-
-
-
-
2,802
2,802
2,802
-
-
-
-
390,505
(4,690)
-
385,815
385,815
390,505
(4,690)
2,802
388,617
388,617
471
471
-
-
3,050
3,050
3,521
-
-
471
471
402,253
(7,234)
-
395,019
395,019
402,253
(7,234)
3,050
398,069
398,540
(i) Secured liabilities and assets pledged as security
At 30 June 2017, the Group had the following facilities that were not drawn at balance date:
Total unutilised facilities - bank loans
Bank loans
17
$’000
16
$’000
124,776
123,909
On 15 December 2014, Ausdrill Limited refinanced its senior bank facilities, and secured a new dual currency $125,000,000
syndicated debt facility. The debt facility, which matures in March 2018, is financed by a number of leading lending institutions in
the Australian banking market. As at 30 June 2017, 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 Positive) 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.
64
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED)
(e) Borrowings (continued)
(ii) Hire purchase liabilities
Within one year
Future finance charges
Hire purchase liabilities:
Current
(iii) Fair value
17
$’000
-
-
-
-
16
$’000
481
(10)
471
471
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:
17
FAIR VALUE
$’000
CARRYING
AMOUNT
$’000
DISCOUNT
R ATE
%
CARRYING
AMOUNT
$’000
16
FAIR VALUE
$’000
DISCOUNT
R ATE
%
On-balance sheet
Non-traded
financial liabilities
USD notes
390,505
402,412
5.86
402,253
352,535
10.18
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 2017
Financial assets
Available-for-sale financial assets
Australian unlisted equity securities
Australian listed equity securities
GBP listed equity securities
Total financial assets
AT 30 JUNE 2016
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
-
2,777
1,374
4,151
LE VEL 1
$’000
1,543
2,098
3,641
-
-
-
-
1,038
-
-
1,038
LE VEL 2
$’000
LE VEL 3
$’000
-
-
-
-
-
-
1,038
2,777
1,374
5,189
TOTAL
$’000
1,543
2,098
3,641
65
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— 6 FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED)
(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
(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 2017:
CONSOLIDATED ENTIT Y
Opening balance 1 July 2016
Acquisitions
Closing balance 30 June 2017
UNLISTED
EQUIT Y
SECURITIES
$’000
-
1,038
1,038
TOTAL
$’000
-
1,038
1,038
(iv) Valuation inputs and relationships to fair value
The fair value of the unlisted equity security has been determined as its acquisition cost due to the acquisition proximity to 30
June 2017.
7 NON-FINANCIAL ASSETS AND LIABILITIES
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
66
17
$’000
14,903
16,421
157,437
188,761
16
$’000
11,951
15,808
163,615
191,374
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7 NON-FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
(a) Inventories (continued)
(i) Assigning costs to inventories
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 $2,003,328 (2016: $2,043,588). These were recognised as an
expense during the year ended 30 June 2017 and included in materials expense in the consolidated statement of profit or loss.
(b) Property, plant and equipment
Non-current
At 1 July 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 subsidiaries
Additions
Impairment reversal on disposal of subsidiary
Transfers to inventory
Depreciation charge
Disposals
Transfers between classes
Closing net book amount
At 30 June 2016
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2017
Opening net book amount
Exchange differences
Additions
Transfers to inventory
Depreciation charge
Disposals
Transfers between classes
Closing net book amount
At 30 June 2017
Cost or fair value
Accumulated depreciation
Net book amount
L AND AND
BUILDINGS
$’000
PL ANT AND
EQUIPMENT
$’000
PL ANT AND
EQUIPMENT
UNDER FINANCE
$’000
TOTAL
$’000
1,064,073
(654,135)
409,938
201,667
(111,362)
90,305
1,325,216
(765,497)
559,719
59,476
-
59,476
59,476
554
(930)
-
121
-
-
(1,801)
-
-
57,420
59,221
(1,801)
57,420
57,420
(503)
970
-
(1,629)
(2,374)
-
53,884
56,717
(2,833)
53,884
409,938
6,671
-
(14,094)
11,375
4,645
(2,468)
(57,275)
(7,174)
78,537
430,155
1,145,675
(715,520)
430,155
430,155
(3,856)
146,447
(2,119)
(60,603)
(5,513)
2,069
506,580
1,229,684
(723,104)
506,580
90,305
19
-
-
920
1,488
-
(11,434)
(504)
(78,537)
2,257
4,725
(2,468)
2,257
2,257
(7)
-
-
(181)
-
(2,069)
-
-
-
-
559,719
7,244
(930)
(14,094)
12,416
6,133
(2,468)
(70,510)
(7,678)
-
489,832
1,209,621
(719,789)
489,832
489,832
(4,366)
147,417
(2,119)
(62,413)
(7,887)
-
560,464
1,286,401
(725,937)
560,464
67
(i) Non-current assets pledged as security
Refer to note 22 for information on non-current assets pledged as security by the Group.
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— 7 NON-FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
(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
17
$’000
41,234
(13,220)
28,014
16
$’000
43,755
(12,464)
31,291
(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.
In 2016, the Group entered into a sale agreement to sell its Miners Rest Motel business for $2.5 million which completed in
September 2016. The sale included 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 was brought to account as at 30 June 2016.
(vi) Change in accounting estimates
In May 2017, an independent expert was commissioned to review the condition of Energy Drilling Australia's ("EDA") assets
and the longer term processes around asset management in relation to EDA’s equipment following being placed in care and
maintenance.
Due to the assets' extended life, management decided to extend the useful life of straight line depreciated assets by three years
from July 2016. This resulted in a reduction in depreciation charge for the year ended 30 June 2017 of $342,000.
(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
17
$’000
12,677
110
825
2,593
4,591
7,194
27,990
16
$’000
10,988
110
811
2,327
4,696
10,995
29,927
68
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7 NON-FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
(c) Deferred tax balances (continued)
(i) Deferred tax assets (continued)
Other
Borrowing and business expenses
Unrealised foreign exchange
Current year tax losses recognised
Available-for-sale financial assets
Total deferred tax assets
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
$'000
DEPRECIATION
$'000
ACCRUALS
$’000
DOUBTFUL
DEBTS
$’000
At 1 July 2015
(Charged)/credited to profit or loss
(Charged)/credited directly to equity
At 30 June 2016
(Charged)/credited to profit or loss
(Charged)/credited directly to equity
At 30 June 2017
11,072
(84)
-
10,988
1,689
-
12,677
14,911
(3,916)
-
10,995
(3,801)
-
7,194
1,312
(501)
-
811
14
-
825
4,524
172
-
4,696
(105)
-
4,591
(ii) Deferred tax liabilities offsetting within tax consolidated group
The balance comprises temporary differences attributable to:
Foreign entities distributable profits
Inventories
Revaluation of land and buildings
Other
Receivables
Prepayments
Total deferred tax liabilities
Adjustment of deferred tax liabilities pursuant to set-off provisions
Net deferred tax liabilities
Deferred tax liabilities expected to be settled within 12 months
Deferred tax liabilities expected to be settled after more than 12 months
NOTES
7(c)(i)
17
$’000
108
(212)
407
1,059
1,362
29,352
7,020
36,372
22,163
7,189
29,352
OTHER
$’000
2,480
3,747
287
6,514
(2,198)
(251)
4,065
17
$’000
9,735
(2,461)
7,469
14,743
223
91
314
15,057
7,020
22,077
(2,147)
17,204
15,057
16
$’000
337
2,203
1,088
449
4,077
34,004
3,296
37,300
24,159
9,845
34,004
TOTAL
$’000
34,299
(582)
287
34,004
(4,401)
(251)
29,352
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
69
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— 7 NON-FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
(c) Deferred tax balances (continued)
(ii) Deferred tax liabilities offsetting within tax consolidated group (continued)
At 1 July 2015
Charged/(credited) - profit or loss
Charged/(credited) - directly to equity
At 30 June 2016
Charged/(credited) - profit or loss
Charged/(credited) - directly to equity
At 30 June 2017
(d) Employee benefit obligations
FOREIGN ENTITIES
DISTRIBUTABLE
PROFITS
$’000
INVENTORIES
$’000
REVALUATION
OF LAND &
BUILDINGS
$’000
7,119
2,624
-
9,743
(8)
-
3,248
(1,131)
-
2,117
(4,578)
-
9,735
(2,461)
7,195
-
689
7,884
(576)
161
7,469
OTHER
$’000
449
95
-
544
(230)
-
314
TOTAL
$’000
18,011
1,588
689
20,288
(5,392)
161
15,057
2017
2016
CURRENT
$’000
NON-CURRENT
$’000
TOTAL
$’000
CURRENT
$’000
NON-CURRENT
$’000
TOTAL
$’000
Leave obligations
40,805
960
41,765
33,814
1,101
34,915
The leave obligations include 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 $40,805,000 (2016: $33,814,000) 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 2017
Assets
Land and buildings
Office buildings
Industrial sites
Total non-financial assets
AT 30 JUNE 2016
Assets
Land and buildings
Office buildings
Industrial sites
Total non-financial assets
LEVEL 1
$’000
LEVEL 2
$’000
LEVEL 3
$’000
TOTAL
$’000
-
-
-
-
-
-
-
-
-
-
-
-
7,055
46,829
53,884
7,055
46,829
53,884
8,048
49,372
57,420
8,048
49,372
57,420
There were no transfers between any levels for recurring fair value measurements during the period.
70
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7 NON-FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
(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 2017 for recurring
fair value measurements:
Opening balance 1 July 2015
Acquisitions
Depreciation and impairment
Revaluation
Gains recognised in other comprehensive income
Closing balance 30 June 2016
Acquisitions
Disposals
Depreciation and impairment
Losses recognised in other comprehensive income
Closing balance 30 June 2017
OFFICE
BUILDINGS
$’000
INDUSTRIAL
SITES
$’000
9,383
93
(912)
-
555
9,119
328
-
(817)
(504)
8,126
50,093
28
(890)
(930)
-
48,301
643
(2,374)
(812)
-
45,758
TOTAL
$’000
59,476
121
(1,802)
(930)
555
57,420
971
(2,374)
(1,629)
(504)
53,884
71
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ——
7 NON-FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
(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
2017
$’000
30 JUNE
2016
$’000
37,080
39,624
DESCRIPTION
Industrial Sites
-Australia
R ANGE OF INPUTS
(PROBABILIT Y-WEIGHTED
AVER AGE)
VALUATION
TECHNIQUE
UNOBSERVABLE
INPUTS*
2017
2016
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
Industrial Sites
-Ghana
8,438
8,603
Office Sites
-Ghana
8,366
9,194
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
In 2016, 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.
72
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8 EQUITY
(a) Contributed equity
Fully paid ordinary shares
(i) Ordinary shares
17
SHARES
16
SHARES
17
$’000
16
$’000
312,277,224
312,277,224
526,447
526,447
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.
(ii) 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.
(iii) 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.
CONSOLIDATED ENTIT Y
NOTES
REVALUATION
SURPLUS
$’000
AVAIL ABLE-
FOR-SALE
FINANCIAL
ASSETS
$’000
SHARE-
BASED
PAYMENTS
$’000
TRANSACTIONS
WITH NCI
$’000
FOREIGN
CURRENCY
TR ANSLATION
$’000
Balance at 1 July 2015
Revaluation - gross
Deferred tax
Currency translation differences
Currency translation joint ventures
Other comprehensive income
Transactions with owners in their
capacity as owners
Share-based payment expense
At 30 June 2016
Balance at 1 July 2016
Revaluation - gross
Deferred tax
Currency translation differences
Currency translation joint ventures
Other comprehensive income
Transactions with owners in their
capacity as owners
Share-based payment expense
At 30 June 2017
7(b), 6(c)
7(c)
19
7(b), 6(c)
7(c)
21,280
(923)
(418)
-
-
(1,341)
-
19,939
19,939
(515)
94
-
-
(421)
(1,185)
1,683
(505)
-
-
1,178
-
(7)
(7)
(2,034)
610
-
-
(1,424)
19
-
-
19,518
(1,431)
5,785
-
-
-
-
-
184
5,969
5,969
-
-
-
-
-
238
6,207
(2,664)
-
-
-
-
-
(34,397)
-
-
(6,828)
1,960
(4,868)
TOTAL
$’000
(11,181)
760
(923)
(6,828)
1,960
(5,031)
-
-
184
(2,664)
(39,265)
(16,028)
(2,664)
-
-
-
-
-
(39,265)
-
(292)
1,174
(1,024)
(142)
(16,028)
(2,549)
412
1,174
(1,024)
(1,987)
-
-
238
(2,664)
(39,407)
(17,777)
73
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— 8 EQUITY (CONTINUED)
(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 paid
Transfer from reserves
Balance 30 June
NOTE
12(b)
17
$’000
96,177
31,201
(6,246)
312
121,444
16
$’000
38,027
58,150
-
-
96,177
74
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9 CASH FLOW INFORMATION
(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 (reversal)/charge of property, plant and equipment
Impairment of available-for-sale assets
Loss/(gain) on sale of non-current assets
Net loss/(gain) on sale of businesses
(Gain)/loss 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 - share-based payments
Change in operating assets and liabilities:
(Increase) in trade debtors
Decrease in inventories
Decrease in deferred tax assets
(Increase)/decrease in other operating assets
Increase in trade creditors
Increase in provision for income taxes payable
Increase/(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
17
$’000
31,201
62,413
-
-
3,630
64
(934)
2,634
(184)
(13,090)
238
(10,025)
878
31
(8,111)
16,393
2,027
45
7,403
94,613
-
-
-
16
$’000
58,150
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
-
-
-
75
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— RISK
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
1 1
12 Capital management
Financial risk management
77
77
84
76
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 10 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
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. They 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 2017.
11 FINANCIAL RISK MANAGEMENT
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
credit
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.
77
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ——
11 FINANCIAL RISK MANAGEMENT (CONTINUED)
(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:
Cash
Trade receivables
Available-for-sale financial assets
Trade payables
Borrowings
Cash
Trade receivables
Available-for-sale financial assets
Trade payables
Borrowings
USD
$’000
GHS
$’000
GBP
$’000
EUR
$’000
TZS
$’000
ZMW
$’000
ZAR
$’000
XOF
$’000
30 JUNE 2017
5,898
10,958
-
(12,931)
-
2,854
-
-
(8,963)
-
-
-
137
(76)
-
1,559
48,488
-
(3,788)
(71,836)
10
-
-
-
-
-
-
-
-
-
-
1,061
-
(65)
-
-
-
-
(221)
-
USD
$’000
GHS
$’000
GBP
$’000
EUR
$’000
TZS
$’000
ZMW
$’000
ZAR
$’000
XOF
$’000
30 JUNE 2016
2,611
30,081
-
(34,144)
(21,453)
982
-
-
(4,580)
-
-
-
2,103
(25)
-
13,242
21,408
-
(2,926)
(19,696)
396
-
-
-
-
5
-
-
-
-
-
1,232
-
-
-
-
-
-
(3,553)
-
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
17
$’000
4,747
4,747
16
$’000
(14,550)
(14,550)
(142)
(4,868)
78
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11 FINANCIAL RISK MANAGEMENT (CONTINUED)
(a) Market risk (continued)
(i) Foreign exchange risk (continued)
Sensitivity analysis
A 10 percent strengthening of the Australian dollar against the following currencies at 30 June would have increased
(decreased) pre-tax profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular
interest rates, remain constant. The analysis is performed on the same basis for 2016.
30 June 2017
USD
GHS
GBP
EUR
TZS
ZAR
XOF
30 June 2016
USD
GHS
GBP
EUR
TZS
ZMW
ZAR
XOF
PROFIT OR
(LOSS)
A$’000
(432)
552
(6)
2,325
(2)
(116)
20
2,341
1,912
323
(189)
(131)
(72)
(1)
(113)
323
2,052
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 2017 and 2016, 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.
79
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ——
11 FINANCIAL RISK MANAGEMENT (CONTINUED)
(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 and the London
Stock Exchange.
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.
CONSOLIDATED ENTIT Y
Available-for-sale assets - increase 10%
Available-for-sale assets - decrease 10%
IMPACT ON OTHER COMPONENTS OF
EQUIT Y
17
$’000
363
(223)
16
$’000
395
(255)
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 respective share price of the shares held.
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.
80
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11 FINANCIAL RISK MANAGEMENT (CONTINUED)
(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)
A2
A3
Ba1
Baa1
Ba3
Baa2
Baa3
B1
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+
B
Other
* 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
17
$’000
79,248
72,489
229
3
16
$’000
81,244
80,340
583
39
151,969
162,206
2,729
7,499
6,807
-
-
3,868
17,797
6
38,706
537
112,726
-
113,263
151,969
124
120,107
904
945
2,314
42,235
81
166,710
4
6,794
3,332
71
968
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
81
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— 11 FINANCIAL RISK MANAGEMENT (CONTINUED)
(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 2017, current trade receivables of the Group with a nominal value of $14,474,644 (2016: $15,083,005) were
impaired. The amount of the provision for impaired receivables was $14,361,469 (2016: $14,725,982). 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 uncollectible
Unused amounts reversed (including currency impact)
At 30 June
17
$’000
61
14,414
14,475
14,726
(295)
2
(72)
14,361
16
$’000
34
15,049
15,083
14,364
919
(521)
(36)
14,726
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 2017, trade receivables of $29,039,368 (2016: $26,133,183 ) 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
17
$’000
28,143
896
29,039
16
$’000
25,266
867
26,133
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.
82
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11 FINANCIAL RISK MANAGEMENT (CONTINUED)
(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
17
$’000
16
$’000
124,776
124,776
123,909
123,909
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
GROUP - AT 30 JUNE 2017
LESS THAN 6
MONTHS
$’000
6 - 12
MONTHS
$’000
BET WEEN 1
AND 2 YEARS
$’000
BET WEEN 2
AND 5 YEARS
$’000
OVER 5
YEARS
$’000
TOTAL
CONTR ACTUAL
CASH FLOWS
$’000
CARRYING
AMOUNT
LIABILITIES
$’000
Trade payables
Fixed rate
Total
GROUP - AT 30 JUNE 2016
Trade payables
Fixed rate
Total
100,390
13,942
114,332
82,839
16,835
99,674
-
13,827
13,827
-
14,382
14,382
-
27,655
27,655
-
416,080
416,080
-
27,655
27,655
-
443,735
443,735
-
-
-
-
-
-
100,390
471,504
571,894
100,390
388,617
489,007
82,839
502,607
585,446
82,839
398,540
481,379
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.
83
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— 12 CAPITAL MANAGEMENT
(a) Risk management
The Group’s objectives when managing its capital is 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 2017 and 30 June 2016 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 2016 (2015: nil) per fully paid share
Interim ordinary fully franked dividend for the year ended 30 June 2017 of 2.0 cents (2016: nil)
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 2017 and 2016 were as follows:
Paid in cash
Satisfied by issue of shares
(ii) Dividends not recognised at the end of the reporting period
17
$’000
388,617
(166,710)
221,907
630,114
852,021
16
$’000
398,540
(181,857)
216,683
606,596
823,279
26%
26%
17
$’000
-
6,246
6,246
6,246
-
6,246
17
$’000
16
$’000
-
-
-
-
-
-
16
$’000
In addition to the above dividends, since year end the directors have recommended the
payment of a final fully franked dividend of 2.0 cents per fully paid ordinary share (2016 - nil).
The aggregate amount of the proposed dividend expected to be paid on 18 October 2017 out of
retained earnings at 30 June 2017, but not recognised as a liability at year end, is
6,246
-
(iii) Franked dividends
Franking credits available for subsequent reporting periods based on a tax rate of 30%
(2016 - 30%)
34,985
39,290
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.
84
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS GROUP STRUCTURE
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
86
89
85
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ——
13 DISCONTINUED OPERATIONS
(a) The Miners Rest Motel
(i) Description
The Group entered into a sale agreement to sell The Miners Rest Motel business for $2.5 million which was completed on 21
September 2016. 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 was brought to account as at 30 June
2016. 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 2017 and
30 June 2016.
Revenue
Expenses
(Loss) before income tax
Income tax (expense)/benefit
(Loss) after income tax of discontinued operation
(Loss) on sale of the subsidiary after income tax
(Loss) from discontinued operation
Other comprehensive income/(loss) from discontinued operation
Net cash (outflow)/inflow from operating activities
Net cash inflow/(outflow) from investing activities
Net cash (outflow)/inflow from financing activities
Net (decrease)/increase 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
(Loss) on sale before income tax and reclassification of foreign currency translation reserve
Income tax expense on gain
Capital losses applied
Tax losses applied
(Loss) on sale after income tax
16
$’000
896
(1,169)
(273)
-
(273)
-
(273)
(273)
106
(145)
(67)
(106)
17
$’000
329
(507)
(178)
-
(178)
(64)
(242)
(242)
(181)
2,408
(2,341)
(114)
17
$’000
2,413
2,477
(64)
-
-
-
(64)
86
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 13 DISCONTINUED OPERATIONS (CONTINUED)
(a) The Miners Rest Motel (continued)
(iii) Details of the sale of the subsidiary (continued)
The carrying amounts of assets and liabilities as at the date of sale, 21 September 2016, were:
Property, plant and equipment
Trade receivables
Inventories
Total assets
Trade creditors
Employee benefits obligations
Total liabilities
Net assets
(b) Drilling Tools Australia Pty Ltd
(i) Description
17
$’000
2,477
-
-
2,477
-
-
-
2,477
On 19 May 2016, the Company announced that it had agreed to sell the Drilling Tools Australia (DTA) business to Finnish
manufacturer, Robit Plc Group. Completion of that sale occurred on 30 June 2016 and is reported in the prior 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 2017 and
30 June 2016.
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
17
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
Outstanding proceeds from the sale of DTA totalled $19,800,000 at 30 June 2016. These were received during the current
financial year.
87
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— 13 DISCONTINUED OPERATIONS (CONTINUED)
(c) 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 continue to 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 2017 and
30 June 2016.
Revenue
Expenses
(Loss) before income tax
Income tax benefit/(expense)
(Loss) after income tax of discontinued operation
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
17
$’000
-
-
-
-
-
-
-
-
-
-
-
-
16
$’000
5,763
(9,769)
(4,006)
1,382
(2,624)
(2,079)
1,482
(3,221)
-
(2,117)
(6)
(2,123)
88
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 14 INTERESTS IN OTHER ENTITIES
(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 **
17
%
16
%
ACN 103534087 Pty Ltd
African Mining Services Burkina Faso Sarl
African Mining Services (Ghana) Pty Ltd
African Mining Services Mali Sarl
African Mining Services Guinee Sarl
African Mining Services Senegal Suarl
AMCG Ltd
Ausdrill Finance Pty Ltd
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 Australia Pty Ltd
BTP Equipment Pty Ltd
BTP Parts Pty Ltd
Connector Drilling Pty Ltd
Diamond Communications Pty Ltd
Drill Rigs Australia Pty Ltd
Energy Drilling Australia Pty Ltd
Golden Plains Pty Ltd
Logistics Direct Australia Pty Ltd (1)
Logistics Direct Ltd
MinAnalytical Holdings Pty Ltd
MinAnalytical Laboratory Services Australia Pty Ltd
Mining Technology and Supplies Ltd
Power Solutions Africa Suarl
Supply Direct Pty Ltd
Supply Direct South Africa Pty Ltd
Synegex Holdings Pty Ltd
West African Mining Services Ltd
(1) Deregistered by ASIC on 17 May 2017.
Australia
Burkina Faso
Australia
Mali
Guinee
Senegal
Ghana
Australia
Australia
Australia
Australia
Australia
Australia
Tanzania
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ghana
Australia
Australia
Ghana
Senegal
Australia
Australia
Australia
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
** 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, Ausdrill
Tanzania Limited, Energy Drilling Australia Pty Ltd, Synegex Holdings Pty Ltd and AMCG Ltd are 100% owned by Ausdrill
International Pty Ltd.
African Mining Services Burkina Faso Sarl, African Mining Services Guinee Sarl, African Mining Services Senegal Suarl and
Power Solutions Africa Suarl 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.
89
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ——
14 INTERESTS IN OTHER ENTITIES (CONTINUED)
(a) Material subsidiaries (continued)
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.
MinAnalytical Laboratory Services Australia Pty Ltd is 100% owned by MinAnalytical Holdings Pty Ltd.
BTP Equipment Pty Ltd is 75% owned by Ausdrill Finance Pty Ltd and 25% owned by Ausdrill International Pty Ltd.
BTP Parts Pty Ltd is 100% owned by BTP Equipment 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 Guinee 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.
African Mining Services Senegal Suarl and Power Solutions Africa Suarl carry on business in Senegal.
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 2017 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
17 16
%
%
17 16
$’000
$’000
African Underground Mining
Services
Ghana, Mali,
Burkina Faso and
Tanzania
50
50
Joint
ventures
Equity
method
58,884
69,764
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.
90
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 14 INTERESTS IN OTHER ENTITIES (CONTINUED)
(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 (loss)/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 (loss)/income
Total comprehensive income
AFRICAN UNDERGROUND
MINING SERVICES
17
$’000
25,058
73,062
98,120
57,266
5,318
29,314
34,632
2,986
16
$’000
11,656
94,680
106,336
61,604
112
26,994
27,106
1,306
117,768
139,528
139,528
26,180
(2,048)
-
(45,892)
117,768
50.0%
58,884
58,884
179,724
2,374
(21,940)
(3,874)
(11,892)
26,180
26,180
(2,048)
24,132
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)
(9,286)
18,148
18,148
3,920
22,068
91
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— UNRECOGNISED ITEMS
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 since the end of the financial year
93
93
93
92
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 15 CONTINGENCIES
(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 2017 as receipt of these amounts are dependent on the outcome of the
arbitration process and the litigation.
16 COMMITMENTS
(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
17
$’000
16
$’000
16,111
172
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
17
$’000
2,638
799
-
3,437
16
$’000
5,671
2,067
20
7,758
17 EVENTS SINCE THE END OF THE FINANCIAL YEAR
On 23 August 2017, the directors declared the payment of a final ordinary fully franked dividend of $6,245,544 (2.0 cents per fully paid
share) to be paid on 18 October 2017 out of retained profits at 30 June 2017. The financial effect of this transaction has not been brought
to account at 30 June 2017.
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.
93
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— OTHER INFORMATION
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
95
97
99
100
101
102
105
106
94
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 18 RELATED PARTY TRANSACTIONS
(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 30 to 40.
(d) Transactions with other related parties
The following transactions occurred with related parties:
Sales of goods and services
Joint ventures
Entities related to key management personnel
Management fee received / receivable
Joint ventures
Purchase of goods
Rental office buildings
17
$
3,595,364
192,496
30,549
83,319
3,901,728
16
$
3,469,781
201,942
6,320
53,241
3,731,284
17
$
16
$
11,507,028
8,365,112
12,263,943
1,811,102
669,932
887,791
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
mining services
For detailed disclosures please refer to the remuneration report on pages 30 to 40.
95
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ——
18 RELATED PARTY TRANSACTIONS (CONTINUED)
(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 related to key management personnel
(f) Loans to/from related parties
Loans to key management personnel
Beginning of the year
Loans advanced
Loan repayments made
Interest charged
Interest received
End of period
(g) Terms and conditions
17
$
16
$
18,491,227
1,954,906
1,592,531
571,708
-
-
-
-
-
-
150,000
-
(150,000)
3,955
(3,955)
-
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 (2016: nil).
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.
96
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 19 SHARE-BASED PAYMENTS
(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 conditions 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 shareholders return (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 and will be settled by the issue of shares.
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 30 June
17
NUMBER OF
OPTIONS
16,100,015
-
-
(2,266,669)
13,833,346
1,966,654
AVER AGE
E XERCISE
PRICE PER
SHARE OPTION
$1.80
$0.25
-
$1.70
$0.85
$3.68
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
$0.85
-
-
$1.11
$0.66
$1.70
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
21/07/2011
21/07/2011
21/07/2011
07/10/2013
07/10/2013
23/12/2015
23/12/2015
23/12/2015
EXPIRY DATE
21/07/2016
21/07/2016
21/07/2016
07/10/2018
07/10/2018
23/12/2020
23/12/2020
23/12/2020
EXERCISE
PRICE
SHARE
OPTIONS
30 JUNE 2017
SHARE
OPTIONS
30 JUNE 2016
$3.55
$3.65
$3.85
$1.70
$1.70
$0.25
$0.25
$0.25
-
-
-
1,966,654
1,966,692
3,299,982
3,299,982
3,300,036
66,666
66,667
66,667
2,399,985
2,400,030
3,699,979
3,699,979
3,700,042
13,833,346
16,100,015
Weighted average remaining contractual life of options outstanding at end of period
2.86 years
3.77 years
97
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— 19 SHARE-BASED PAYMENTS (CONTINUED)
(a) Employee Option Plan (continued)
(i) Fair value of options granted
There were no options granted during the year ended 30 June 2017 (2016: 11,600,000).
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
17
$’000
238
16
$’000
184
98
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20 REMUNERATION OF AUDITORS
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
17
$
16
$
471,412
471,412
561,748
561,748
111,569
227,071
10,000
592,981
86,967
875,786
312,542
291,230
140,461
176,102
32,373
485,376
21,410
488,742
45,403
45,403
21,029
21,029
1,123,760
1,385,557
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.
99
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— 21 EARNINGS PER SHARE
(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
Weighted average number of ordinary shares used as the denominator in calculating
basic earnings per share
Adjustments for calculation of diluted earnings per share:
Effect of share options on issue
17
CENTS
10.1
(0.1)
10.0
16
CENTS
6.6
12.1
18.7
CENTS
CENTS
9.8
(0.1)
9.7
6.4
11.8
18.2
17
$’000
16
$’000
31,443
(242)
31,201
20,512
37,638
58,150
17
NUMBER
16
NUMBER
312,277,224
312,277,224
7,978,121
7,117,396
Weighted average number of ordinary and potential ordinary shares used as the denominator in
calculating diluted earnings per share
320,255,345
319,394,620
(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.
100
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 22 ASSETS PLEDGED AS SECURITY
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
Floating charge
Plant and equipment
Freehold land and buildings
Investment
Total non-current assets pledged as security
Total assets pledged as security
17
$’000
16
$’000
165,321
158,889
183,179
507,389
155,693
78,461
111,660
345,814
-
2,257
468,128
53,884
64,073
586,085
586,085
1,093,474
273,216
39,624
75,405
388,245
390,502
736,316
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.
101
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— 23 DEED OF CROSS GUARANTEE
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 Australian Securities and Investments Commission Instrument 2016/785 (as amended).
The closed group consists of Ausdrill Limited and the following entities:
ACN 103534087 Pty Ltd;
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;
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 instrument, 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'.
Set out over page is a consolidated statement of profit or loss, a consolidated statement of comprehensive income and a summary of
movements in consolidated retained earnings for the closed group.
102
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 23 DEED OF CROSS GUARANTEE (CONTINUED)
(a) Consolidated statement of profit or loss, consolidated statement of comprehensive income and
summary of movements in consolidated retained earnings (continued)
Consolidated statement of profit or loss
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 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
(Loss)/gain 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
Retained earnings transfer
Dividends paid
Retained earnings at the end of the financial year
17
$’000
16
$’000
606,368
13,922
(289,465)
(172,679)
(12,278)
(52,239)
(3,173)
(31,555)
(44,038)
13,090
-
27,953
(10,206)
17,747
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
17,747
60,539
528
132,367
(421)
(1,424)
(1,317)
16,430
18,880
17,747
312
(6,246)
30,693
(1,341)
1,178
132,204
192,743
15,412
60,539
-
-
75,951
103
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— 17
$’000
143,145
122,295
142,575
-
3,155
411,170
98,250
112,624
5,189
407,308
42,085
665,456
16
$’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
1,076,626
1,157,600
83,825
-
2,194
25,509
77,548
470
5,725
22,614
111,528
106,357
391,022
31,813
742
423,577
535,105
541,521
526,447
(15,619)
30,693
541,521
395,018
66,582
808
462,408
568,765
588,835
403,910
108,974
75,951
588,835
23 DEED OF CROSS GUARANTEE (CONTINUED)
(b) Consolidated statement of financial position
Set out below is the consolidated statement of financial position as at 30 June 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
104
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 24 PARENT ENTITY FINANCIAL INFORMATION
(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 (loss)/income
17
$’000
57,726
485,340
543,066
23,474
6,957
30,431
16
$’000
78,882
532,366
611,248
24,821
7,060
31,881
526,447
526,447
704
6,206
104,904
(183,177)
57,551
512,635
(60,723)
(60,723)
704
5,969
104,904
(183,177)
124,520
579,367
124,520
124,520
The financial information for the parent entity has been prepared in accordance with note 25 (aa)
(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 $nil (2016: $65,632)
In addition, there are cross guarantees given by Ausdrill Limited as described in note 23. Deficiencies exist in some of these companies.
(c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2017 or 30 June 2016. For information about guarantees given
by the parent entity, please see above.
(d) Pre-2015 reserve
Each reserve of the parent entity has the same nature and purpose as described for the consolidated Group (in note 8 (b)). In addition,
the parent entity on June 30 2016 and June 30 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.
105
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— 25 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 applied the following standards and amendments for the first time for their annual reporting period commencing
1 July 2016:
AASB 2014-3 Amendments to Australian Accounting Standards - Accounting for Acquisitions of Interests in Joint Operations
AASB 2014-4 Amendments to Australian Accounting Standards - Clarification of Acceptable Methods of Depreciation
and Amortisation
AASB 2015-1 Amendments to Australian Accounting Standards - Annual improvements to Australian Accounting Standards
2012 - 2014 cycle, and
AASB 2015-2 Amendments to Australian Accounting Standards - Disclosure initiative: Amendments to AASB 101.
The adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect
future periods.
(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 2017
reporting period and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards
and interpretations is set out below.
AASB 9 Financial Instruments
AASB 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces
new rules for hedge accounting and a new impairment model for financial assets.
The Group’s equity instruments that are currently classified as available-for-sale will satisfy the conditions for classification as,
at fair value through other comprehensive income (FVOCI) and hence there will be no change to the accounting for these assets.
Accordingly, the Group does not expect the new guidance to affect the classification and measurement of its financial assets.
However, gains or losses realised on the sale of financial assets at FVOCI will no longer be transferred to profit or loss on
sale, but instead reclassified below the line from the FVOCI reserve to retained earnings. During the 2017 financial year,
A$933,674 of such gains were recognised in profit or loss in relation to the disposal of available-for-sale financial assets.
There will be no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the
accounting for financial liabilities that are designated as, at fair value through profit or loss and the Group does not have
any such liabilities. The derecognition rules have been transferred from AASB 139 Financial Instruments: Recognition and
Measurement and have not been changed.
The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather
than only incurred credit losses as is the case under AASB 139. It applies to financial assets classified at amortised cost,
debt instruments measured at FVOCI, contract assets under AASB 15 Revenue from Contracts with Customers, lease
receivables, loan commitments and certain financial guarantee contracts. While the Group has not yet undertaken a detailed
assessment of how its impairment provisions would be affected by the new model, it may result in an earlier recognition of
credit losses.
The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to
change the nature and extent of the Group’s disclosures about its financial instruments particularly in the year of the adoption
of the new standard.
The Group does not intend to adopt AASB 9 before its mandatory date of 1 July 2018.
106
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 25 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(a) Basis of preparation (continued)
(iii) New standards and interpretations not yet adopted (continued)
AASB 15 Revenue from Contracts with Customers
The AASB has issued a new standard for the recognition of revenue. This will replace AASB 118 which covers contracts
for goods and services and AASB 111 which covers construction contracts. The new standard is based on the principle
that revenue is recognised when control of a good or service transfers to a customer. The standard permits either a full
retrospective or a modified retrospective approach for the adoption.
Management is currently assessing the effects of applying the new standard on the Group's financial statements and has
identified the following from the initial review;
Ausdrill currently has both contracts for services (contract mining, both underground and surface mining, drill and blast,
exploration drilling, rental of equipment and mineral assays and analysis) and contracts for sale of goods (predominantly
BTP Equipment and BTP Parts). In the 30 June 2017 financial statements, the contracts for services are recognised over
time and the sale of goods at a point in time which would be the same under the new standard.
Management has considered whether a contract exists, whether the party to the contract is a customer, what the
performance obligations are, what the transaction price payable by the customer is, how the contract price is split across the
performance obligations, and whether the contract means performance over time or at a point in time.
At this stage, management has assessed the effect of applying the new standard on the Group's financial statements and
does not expect that there will be significant impact on its consolidated financial statements. Management will continue to
assess the effect of the new standard over the next twelve months which will include consideration of the financial statement
disclosure requirements.
Mandatory for financial years commencing on or after 1 January 2018, the Group intends to adopt the standard using the
modified retrospective approach which means that the cumulative impact of the adoption will be recognised in retained
earnings as of 1 July 2018 and that comparatives will not be restated. The new standard will only be applied to contracts that
remain in force at the transition date.
AASB 16 Leases
IFRS 16 was issued in January 2016. It will result in almost all leases being recognised on the balance sheet, as the
distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased
item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases.
The accounting for lessors will not significantly change.
The standard will affect primarily the accounting for the Group’s operating leases. As at the reporting date, the Group has
non-cancellable operating lease commitments of $3,436,838 see note 16. The Group estimates that approximately 77%
of these relate to payments for short-term and low value leases which will be recognised on a straight-line basis as an
expense in profit or loss. However, the Group has not yet assessed what other adjustments, if any, are necessary because
of the change in the definition of the lease term and the different treatment of variable lease payments and of extension and
termination options. It is therefore not yet possible to estimate the amount of right-of-use assets and lease liabilities that will
have to be recognised on adoption of the new standard and how this may affect the Group’s profit or loss and classification of
cash flows going forward.
Mandatory for financial years commencing on or after 1 January 2019. At this stage, the Group does not intend to adopt
the standard before its effective date. The Group intends to apply the simplified transition approach and will not restate
comparative amounts for the year prior to first adoption.
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, and
available-for-sale financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit
or loss.
107
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ——
25 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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 transferred asset. Accounting policies
of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
(i) Subsidiaries (continued)
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 carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described in 25(i).
(iv) Changes in ownership interests
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.
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.
(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.
108
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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), and
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.
(ii) Dividends
Dividends are recognised as revenue when the right to receive payment is established. This applies even if they are paid out of
pre-acquisition profits. However, the investment may need to be tested for impairment as a consequence, refer note 25(m).
109
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ——
25 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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
profit or loss 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.
110
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 25 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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, and
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.
111
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ——
25 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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
Classification
The Group classifies its investments in the following categories:
loans and receivables, and
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).
112
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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 profit or loss. Each year, the difference between depreciation based on the revalued carrying amount of the asset charged
to profit or loss and depreciation based on the asset’s original cost, net of tax, is reclassified from the property, plant and equipment
revaluation surplus to retained earnings.
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. When revalued assets are sold, it is Group policy to transfer any amounts included in other reserves in respect of those
assets to retained earnings.
(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.
113
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —— 25 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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.
114
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 25 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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 Monte Carlo simulation valuation 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 is calculated by dividing:
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, and
the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
115
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ——
25 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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.
116
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DIRECTORS' DECLARATION
DIRECTORS' DECLARATION
In the directors' opinion:
(a) the financial statements and notes set out on pages 44 to 116 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 2017 and of its performance for the financial year
ended on that date, and
(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
Director
Perth
23 August 2017
117
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS
118
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT —— 119
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTINDEPENDENT AUDITOR'S REPORT TO THE MEMBERS —— 120
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS 121
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTINDEPENDENT AUDITOR'S REPORT TO THE MEMBERS —— 122
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS 123
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTINDEPENDENT AUDITOR'S REPORT TO THE MEMBERS —— 124
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS 125
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORTINDEPENDENT AUDITOR'S REPORT TO THE MEMBERS —— 126
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT ——INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS SHAREHOLDER INFORMATION
A. DISTRIBUTION OF EQUITY SECURITIES
Analysis of numbers of equity security holders by size of holding as at 31 July 2017:
HOLDING
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
There were 1,231 holders of less than a marketable parcel of 500 ordinary shares.
B. EQUITY SECURITY HOLDERS
The names of the twenty largest holders of quoted equity securities as at 31 July 2017 are listed below:
ORDINARY SHARES
NUMBER OF
HOLDERS
2,421
2,254
948
1,242
127
6,992
SHARES
839,665
5,923,176
7,306,561
33,864,447
264,343,375
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. National Nominees Limited
6. Bremerton Pty Ltd
7. BNP Paribas Noms Pty Ltd
8. BNP Paribas Nominees Pty Ltd
9. RBC Investor Services Australia Nominees Pty Ltd
10. CTS Funds Pty Ltd
11. Brispot Nominees Pty Ltd
12. Mr Brian Gregory Wright & Mrs Wendy Joy Wright >
13. Mrs Patricia Gladys Wright
14. Royale Blue Pty Ltd
15. Mr Frederick Graham Moir & Mr Kevin Vincent Benson
16. CS Third Nominees Pty Ltd
17. Bremerton Super Fund Pty Ltd
18. BNP Paribas Nominees Pty Ltd
19. Yolena Pty Ltd
20. Brazil Farming Pty Ltd
Total held by the twenty largest shareholders
C. SUBSTANTIAL HOLDERS
Substantial holders in the Company are set out below as at 31 July 2017:
NAME
1. Cherry Garden Nominees Pty Ltd / Ronald George Sayers
2. FMR LLC
3. Bremerton Group / PM & JL Bartlett
D. VOTING RIGHTS
ORDINARY SHARES
NUMBER HELD
PERCENTAGE OF
ISSUED SHARES
69,278,049
36,301,664
29,473,164
23,694,611
19,500,613
18,372,661
4,052,743
3,927,289
3,575,581
3,139,665
2,702,568
2,584,380
2,466,233
2,267,000
2,000,018
1,751,501
1,552,793
1,453,561
1,345,961
1,227,435
230,667,490
22.18%
11.62%
9.44%
7.59%
6.24%
5.88%
1.30%
1.26%
1.15%
1.01%
0.87%
0.83%
0.79%
0.73%
0.64%
0.56%
0.50%
0.47%
0.43%
0.39%
73.88%
ORDINARY SHARES
NUMBER HELD
PERCENTAGE
37,296,782
26,034,395
20,929,740
11.94%
8.34%
6.70%
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.
127
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT —— FINANCIALS TABLE
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
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
DIVIDENDS
Total dividends per share (interim and final
declared)
Total dividends paid
NET DEBT / TOTAL CAPITAL
EBIT* TO SALES REVENUE
EBITDA* TO SALES REVENUE
EMPLOYEES AT YEAR END
13
1,128,559
2,724
1,131,283
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
743,003
1,632
744,635
126,536
(67,894)
58,642
(32,064)
26,578
(1,485)
25,093
(4,581)
37,638
58,150
312,277
312,277
18.7
18.2
17
776,328
2,391
778,719
136,834
(62,385)
74,449
(29,121)
45,328
-
45,328
(13,885)
(242)
31,201
312,277
322,177
10.0
9.7
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
1,187,150
557,036
630,114
2.02
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
132,190
94,692
(101,206)
(6,965)
166,710
388,617
221,907
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
000's
000's
CENTS
CENTS
$'000
$'000
$'000
$
$'000
$'000
$'000
$'000
$'000
$'000
$'000
CENTS
$'000
12.00
44,498
4.50
24,981
%
%
%
#
36
13.20
24.17
5,703
34
9.01
21.02
4,578
1.00
9,369
39
5.17
15.39
4,080
-
-
26
7.89
17.03
3,841
4.00
6,246
26
9.59
17.63
4,582
* EBITDA, EBIT and operating profit before income tax excludes impairment expense and discontinued operations.
128
AUSDRILL ANNUAL REPORT 2017FINANCIAL REPORT —— OUR BUSINESS AT A GLANCE
——
CONTRACT
MINING
SERVICES
——
SURFACE MINING
UNDERGROUND MINING
EXPLORATION DRILLING
DRILLING
SERVICES
——
EXPLORATION
DRILL & BLAST
PRODUCTION
GRADE CONTROL
WATER WELLS
MINERAL ANALYSIS
EQUIPMENT
SERVICES &
SUPPLIES
——
EARTHMOVING FLEET
HIRE AND SALES
EARTHMOVING
EQUIPMENT PARTS
SUPPLY AND LOGISTICS
ALL
OTHER
——
DIAMOND COMMUNICATIONS
MINANALYTICAL SERVICES
WELL CONTROL SOLUTIONS
OUR MARKET
OUR MARKET
OUR MARKET
OUR MARKET
African based provider of
mining services to the world’s
leading resource companies.
Australian based provider of
mining services to the world’s
leading resource companies.
Key services include drill
and blast, load and haul,
exploration drilling and
equipment hire for surface
mining operations. Complete
underground mining service.
Key services include drill
and blast, grade control,
waterwell drilling, explosive
supply, exploration drilling,
drill rig manufacture and
mineral analysis.
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.
Australian based service
providers including the
provision of pressure control
and pump product equipment
hire and maintenance, mineral
analysis and services to the
telecommunications and
utility sectors.
——XXX
FOLLOW US AT
AUSDRILL.COM.AU