I
AUSDRILL 18
ANNUAL
REPORT
BRINGING
MORE TO
MINING
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW II
02
04
25
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44
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Chairman’s letter to shareholders
Operating and financial review
Financial report
Corporate directory
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 to the members
Shareholder information
Financials table
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW 01
THE END OF AN ERA –
RON SAYERS
Ausdrill commenced operations in 1987 from very humble beginnings when Ron Sayers
started the Company with a single drill rig. Over 30 years, Ron has built an iconic Australian
company that has evolved into an international group operating in 10 countries, providing
employment for more than 5,000 people.
Ron is a legend in the West Australian mining community. He has instilled a fair and caring
culture in the business that will serve the organisation well for many years to come.
Ron’s drive to grow a strong, successful business and his love of the industry are obvious and
we have all learned much from him. He truly is unique and his open and direct approach to
business has earned him respect from many quarters.
On 3 July 2018, Ron retired from the company he founded to spend time with his family and
pursue his other interests.
On behalf of the Board, I would like to thank Ron for his many years of service and to
congratulate him on the great legacy he has left us.
RON SAYERS FOUNDED AUSDRILL
IN 1987 IN KALGOORLIE, BUILDING
THE BUSINESS INTO A GLOBAL
DIVERSIFIED MINING GROUP.
R O N S AY E R S
O U T G O I N G M A N A G I N G D I R E C T O R
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW 02 AUSDR IL L A NNUA L R EP OR T 2018
CHAIRMAN’S LETTER TO SHAREHOLDERS
Chairman’s letter to shareholders
I am proud to present the 2018 Annual Report to Shareholders.
The Company has delivered another exceptional result and its
employees continue to do outstanding work in a challenging and
changing environment.
In August 2017, the company raised approximately $100.0 million
through the successful completion of a placement to institutional
and sophisticated investors which was strongly supported by
existing and new institutional investors. The company continues
to benefit from a strong balance sheet which enables it to invest in
opportunities as they arise.
Highlights for the year
People and safety
I am very proud to be able to report that the Group’s safety
performance continues to improve. Our continued engagement and
commitment to the well-being of Ausdrill’s employees has resulted
in a 25% reduction in the number of recordable injuries, and a 41%
reduction in the Total Recordable Injury Frequency Rate (TRIFR),
to record low levels.
Ensuring all our people return home safely at the end of their shift
remains the company’s highest priority.
Ausdrill is proud to support the communities in which we operate
and consistent with our values, commitment to shareholders
and our social contract, we seek to build our business along with
sustainable communities.
At 30 June 2018, we have 5,278 employees engaged with
our group across 10 countries. In line with our objective of
providing employment opportunities for the people who live in the
communities in which we operate, 98% of our total African Mining
Services workforce are nationals.
Our people are our business and we will continue to engage in
local employment, invest in the communities in which we operate,
and develop and diversify our workforce for a safe and successful
shared future.
Ausdrill has carefully worked its way out of the mining industry
downturn and is in a strong position looking forward. Rationalisation
and business improvement activities continue to contribute to
better returns for our shareholders and we are proud to be able to
deliver another strong financial performance, in line with what we
committed to this time last year. It is a credit to the leadership and
focus of our executive team and the commitment and dedication of
the entire Ausdrill family.
The Company has reported revenues of $887.3 million and net
profit after tax of $61.1 million.
2018 has been a busy year during which the Company mobilised
and ramped up five new projects, being Mako in Senegal, Boungou
in Burkina Faso, Yanfolila in Mali, Subika in Ghana, and Wodgina in
Australia. Large capital and working capital expenditures have been
committed to these projects, along with substantial growth in our
workforce numbers.
Ausdrill continues to innovate and invest in technology to remain
at the forefront of
industry developments. During the year,
the Company acquired a strategic investment in HiSeis, a business
that is focused on resource definition, and invested in Chrysos,
a company that is focused on rapid mineral ore assessment.
The Chrysos technology has the potential to be a game-changer for
the industry and Ausdrilll is excited to be part of this journey.
As part of its strategy to rationalise the group and focus on core
competencies, Ausdrill sold Diamond Communications to Power
Lines Plus. Ausdrill owned this business for 19 years and is pleased
to see it find a home more aligned with its business model.
The Company has reported revenues of
$887.3 million and net profit after tax of
$61.1 million.
CHAIRMAN’S LETTER TO SHAREHOLDERS
AUSDR IL L A NNUA L R EP OR T 2018
03
Board renewal
Challenges
During the year, the Board implemented a board renewal strategy
which was aimed at providing shareholders with a balanced
representation, harnessing diversity and skillsets with a long-term
future focus.
In June, after an extensive international search, the Board appointed
highly experienced mining services executive Mark Norwell as the
Company’s new Managing Director and Chief Executive Officer.
Mark was, until recently, the Executive General Manager – Strategy
& Growth at Thiess Pty Ltd, and a member of Thiess’ executive
leadership team. Over a 20-year career in the mining services
sector, he has held senior roles with Leighton Contractors, HWE
Mining and Macmahon Holdings. Mark will commence in the role at
Ausdrill on 17 September 2018.
The Board subsequently continued its renewal strategy with the
appointment of two new non-executive directors, Robert Cole and
Alexandra Atkins. Their combined wealth of knowledge and
experience strengthens the Board and provides a diverse and
comprehensive skill set to support Ausdrill in its strategy to grow
and diversify the business, and to be more technology and
innovation focused.
In addition to these Board appointments, we have a very strong and
committed executive team in place which will enable the Company
to capitalise on the next phase of growth.
The past year has been a period of significant change for the
Ausdrill board. We have farewelled our long-standing Chairman,
Terry O’Connor and the company’s founder and managing director,
Ron Sayers, while more recently non-executive directors Mark
Connelly and Don Argent have also resigned.
Our grateful thanks go to each of these directors for their contribution.
As demand for mining services increases, labour and equipment
markets continue to tighten.
Lead times for new equipment continue to push out and securing
build slots and good second-hand equipment is critical to the
Company’s competitive advantage. Further, the competition for
high quality labour has increased, particularly in the past 12 months.
The Company’s remuneration and benefits practices are continually
reviewed to ensure we remain market competitive as we contest for
our most valuable resource: people.
Operationally, 2018 has been more challenging, with the concurrent
mobilisation and ramp-up of five new projects, with some of the
projects incurring more costs than originally planned. Having said
that, the overall underlying net profit from continuing operations
of the Company increased from $26.5 million to $45.2 million.
The Company
improvement strategies
focused on
to continue to deliver better margins and returns for our shareholders.
remains
Ausdrill also demobilised three projects during the year, being
Siguiri in Guinea, and Ravensthorpe and Prominent Hill in Australia.
These serve as a reminder that the Company operates in a cyclical
and competitive environment and must maintain its customer focus
to continue to secure new work to remain successful into the future.
Looking forward
The Group’s strategy is focused on investing in higher barrier-to-
entry businesses that deliver sustainable profits to shareholders.
The Board will consider both organic and
inorganic growth
opportunities to achieve this.
Overall, the Company is in a very good position to capitalise on
opportunities to deliver on its long-term strategy of being a Tier 1 global
mining services provider. Very importantly, we have outstanding,
long-term relationships with the major mining companies, many of
whom have been Ausdrill customers for decades.
We can therefore look forward to another good year and would like
to thank our customers, suppliers, shareholders and employees for
their ongoing role in the Company’s success.
Ian Cochrane
Chairman
Ausdrill Limited
04
OPERATING AND
FINANCIAL REVIEW
BUSINESS
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW • 05
Key highlights
■ Key safety indicators at record low levels
■ Sales revenue of $887.3 million, up 16.4%
■ Reported EBITDA of $177.4 million, up 30.6%
■ Reported EBITDA margin increased from 17.8% to 20.0%
on the back of efficiencies and scale benefits
■ Reported net profit after tax of $61.1 million, up 95.7%
■ Underlying1 profit after tax of $45.2 million, up 70.8%
■ Basic earnings per share 17.4 cents per share, up 74.0%
■ Fully franked final dividend of 3.5 cents per share declared,
comprising a 1.5 cents per share final dividend and a 2.0 cents per
share special dividend
■ Strong balance sheet with significant financial flexibility.
Approximately $200 million in undrawn debt facilities and
cash reserves of $137.3 million - gearing of 25.7%
■ Over $500 million in contract extensions and new work won
■ 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 FY19
■ Targeting 20%-30% underlying profit growth for FY19
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW 06 AUSDR IL L A NNUA L R EP OR T 2018
06
OPERATING AND FINANCIAL REVIEW
HOW WE PERFORMED
887.3
173.7
177.4
74.1
826.3
762.6
743.0
719.8
135.8
126.5
110.8
14
16 17 18
14 15 16 17 18
15
14
15
16
17
18
$887.3 M
SALES REVENUE 1
$177.4 M
EBITDA 2
1 Based on FY18 sales revenue from continuing operations, excluding intercompany sales and associates revenue
2 Excludes impairment from prior corresponding periods
44.6
34.4
26.6
2.1
15
14
16
17
18
$74.1 M
PROFIT BEFORE TA X 2
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW OPERATING AND FINANCIAL REVIEW
AUSDR IL L A NNUA L R EP OR T 2018
07
07
The following charts show the percentages of sales
revenue by business activity and by geography.
Revenue by business activity 1
Revenue by geography 1
Other (5%)
Exploration (10%)
Drill & Blast
Equipment Hire
Contract Mining Africa (49%)
BUSINESS ACTIVIT Y
SECTOR
Exploration (10%)
COUNTRY
SECTOR
Other (8%)
Contract Mining Africa
57.6%
Equipment Hire & Part Sales
14.6%
Drill & Blast
Exploration
Other
12.6%
10.2%
5.0%
Production
86.1%
Exploration
10.2%
Other
3.7%
Production (82%)
Australia
Ghana
Mali
Burkina
Senegal
Guinea
Other
Africa
Australia
Other
57.6%
40.6%
1.8%
40.6%
28.9%
13.3%
8.2%
4.4%
2.8%
1.8%
Other
Guinea
Senegal
Burkina
Mali
Ghana
Other
Africa
Australia
Contract Mining
Services Africa
Drilling Services
Australia
Equipment Services
& Supplies
All Other
$511 M
58 %
$215 M
24 %
$148 M
17 %
$13 M
1 %
OF GROUP REVENUE
OF GROUP REVENUE
OF GROUP REVENUE
OF GROUP REVENUE
1 Revenues shown in the charts above are for the year ended 30 June 2018 (FY18) for continuing operations and after inter-segment eliminations.
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW
0808 AUSDR IL L A NNUA L R EP OR T 2018
OPERATING AND FINANCIAL REVIEW
WHO
WE ARE
Diversified mining
services company with
over 5,000 people working
in 10 countries on some
of the world’s largest
mining projects.
WHAT
WE DO
Provide mining and drilling
services, mobile equipment
and supplies so our
customers can get more
from the ground.
HOW
WE DO IT
Customers for life
Family sticks together
Chase the opportunity
Find a way
Principal Activities
Ausdrill (Company or Group) has invested in people, businesses
and equipment for over more than 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 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, equipment sales and hire, and parts sales. Ausdrill’s
Australian regional footprint includes, operations based in Western
Australia, Queensland, South Australia, New South Wales and
Northern Territory.
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.
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).
Ausdrill’s African operations are diversified across a portfolio of clients
and jurisdictions including Ghana, Mali, Burkina Faso, Senegal, Cote
d’Ivoire, Tanzania, South Africa and Zambia.
Africa, in particular West Africa, offers strong 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.
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW
09
THE GROUP’S FOCUS 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, Newmont, Gold Fields, Perseus, Peabody,
Toro Gold and SEMAFO 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 2018, approximately 82% of mining services revenues
were generated from the provision of services to gold mining companies and approximately 6% to iron ore
mining companies, in each case, primarily for production-related services.
$ MILLION
Continuing operations
Sales revenue
EBITDA
EBIT
Profit/(loss) before tax
Profit/(loss) after tax
Discontinued operations
Profit/(loss) after tax
Reported net profit/(loss) after tax
18
887.3
177.4
102.9
74.1
59.3
1.7
61.1
17
762.6
135.8
73.6
44.6
30.9
0.3
31.2
% CHANGE FROM PRIOR
CORRESPONDING
PERIOD
16.4%
30.6%
39.7%
66.0%
91.8%
95.7%
Revenue
Expenses
Sales revenue from continuing operations for the Group increased
16.4% to $887.3 million. Revenue growth was driven by the Contract
Mining Services Africa segment, where revenues increased by
26.3% following the commencement of mining works at three new
projects, being Boungou for SEMAFO in Burkina Faso, Yanfolila for
Hummingbird Resources in Mali, and Mako for Toro Gold in Senegal.
The Equipment Services and Supplies segment delivered 13.0% in
external revenue growth driven by demand for mining equipment.
Drill and blast activities in the Drilling Services Australia segment
remained stable. New work secured at Wodgina for Mineral
Resources, Tropicana for Macmahon and Mungari for Evolution
Mining. Production drilling continues to deliver strong returns.
Competition and margins in exploration drilling remain a challenge
but represents only a small portion of reported revenue.
Reported sales revenue excludes Ausdrill’s 50% share of revenue
generated by AUMS, being $145.2 million (2017: $89.9 million).
AUMS is equity accounted and only Ausdrill’s 50% share of net
profits are included in the consolidated income statement. Revenue
from this joint venture grew on the back of the new Subika project for
Newmont in Ghana.
The Group’s three largest expense categories are materials, labour,
and depreciation and amortisation, which represent 84.4% (2017:
84.7%) of all expenses.
Materials expense as a percentage of revenue decreased from
42.2% to 40.3% during FY18, but increased in absolute terms
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 18.0%, which was in line with the
increase in sales revenue. This was predominantly due to a 15.3%
increase in headcount in Africa from 2,791 to 3,216 to service
the commencement of mining works at new projects in Africa.
Australian employee numbers remained stable during FY18.
Depreciation and amortisation expenses increased by 19.9% or
$12.4 million, largely as a result of growth in the fleet required to
commence new projects in Africa.
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW
10
Earnings from continuing operations
Contract Mining Services Africa
EBITDA increased from $135.8 million to $177.4 million for the
year ended 30 June 2018. The major drivers of the increase were
from improved operational performance in Equipment Services
and Supplies, Drilling Services Australia, growth of the African
underground portfolio, a one-off claim settlement of $5.3 million
and foreign exchange gain of $11.2 million contributing to earnings
improvement. Equity accounted profits delivered through AUMS
increased from $13.1 million in 2017 to $22.3 million in 2018.
EBITDA margin (excluding equity accounted profits) increased from
16.1% to 17.5%.
EBIT (from continuing operations) increased from $73.6 million
to $102.9 million for the year ended 30 June 2018 and the EBIT
margin (excluding equity accounted profits) has increased from
7.9% to 9.1%. The EBIT margin has been positively impacted by
foreign exchange gains and a one-off claim settlement, partially
offset by project start up costs.
The operating profit before tax from continuing operations increased
from $44.6 million to $74.1 million for the year ended 30 June 2018.
The reported profit after tax from continuing operations for the year
totalled $59.3 million, an increase of 91.8% on the $30.9 million
reported in 2017.
The Group reported a net profit after tax of $1.7 million from the now
discontinued Diamond Communications business which was sold
1 May 2018.
Overall Return on Average Capital Employed increased from
8.6% in 2017 to 10.7% in 2018.
SEGMENT PERFORMANCE
EX TERNAL SALES
REVENUE
EARNINGS BEFORE
INTEREST AND TA X1
18
510.9
17
404.7
18
47.0
17
49.3
$ MILLION
CMSA
1EBIT excludes AUMS equity accounted profits
The Contract Mining Services Africa business has reported a 26.2%
increase in revenue, largely driven by the commencement of mining
at its three new projects, as well as increased equipment hire at
Nsuta in Ghana.
Reported EBIT margin decreased slightly due to the mobilisation
and ramp-up of the three new projects, which incurred significant
mobilisation costs including freight, consultants and contractors
to establish operations. The business expensed $5.9 million in
major repairs incurred to mobilse equipment to new projects.
Excluding these, reported EBIT would have been $52.9 million
for an EBIT margin of 10.4%. Further, the Siguiri contract in Guinea,
ceased in October 2017.
The operating profit before tax from
continuing operations increased from
$44.6 million to $74.1 million for the
year ended 30 June 2018.
Key AMS contracts:
The key AMS contracts in place at 30 June 2018:
CLIENT
PROJECT
LOCATION
SERVICES PROVIDED
SOMIFI (subsidiary of Resolute)
Tabakoroni
Hummingbird Resources
Perseus
AngloGold Ashanti
SEMAFO
Toro Gold
Ghana Manganese Company
Nordgold
Nordgold
B2Gold
B2Gold
West African Resources
Golden Rim Resources
Cardinal Resources
Tietto Minerals
Yanfolila
Edikan
Iduapriem
Boungou
Mako
Nsuta
Bissa
Taparko
Fekola
Kiaka
Tanlouka
Piela
Bolgatanga
Abujar
Mali
Mali
Ghana
Ghana
Burkina Faso
Senegal
Ghana
Burkina Faso
Burkina Faso
Mali
Burkina Faso
Burkina Faso
Burkina Faso
Ghana
Ivory Coast
Open pit mining
Open pit mining
Open pit mining
Open pit mining
Open pit mining
Open pit mining
Equipment hire
Equipment hire
Equipment hire
Exploration drilling
Exploration drilling
Exploration drilling
Exploration Drilling
Exploration drilling
Exploration Drilling
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW
11
African Mining Services (AMS)
In Burkina Faso, AMS:
In Ghana, AMS:
•
•
•
•
signed a 24-month contract with Ghana Manganese Company
to provide hire equipment at the Nsuta mine;
continued to provide surface mining services to Perseus at its
Edikan gold mine;
extended exploration drilling contracts with Cardinal Resources
in the Upper East Region of Ghana; and
continued open pit contract mining at Iduapriem for AngloGold
Ashanti.
In Mali, AMS:
•
•
•
secured a contract with Resolute’s subsidiary, SOMIFI,
to provide open pit mining services at the Tabakoroni gold
project in Mali for 18 months;
continued exploration drilling with B2Gold at its Fekola gold
project; and
completed open pit contract mining at Syama for Resolute
through the year.
•
•
•
commenced a 60-month contract to provide surface mining
services to SEMAFO at its Boungou gold mine;
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; and
extended exploration drilling contracts with B2Gold and West
African Resources.
In Senegal, AMS:
•
commenced a 75-month contract to provide surface mining
services to Toro Gold Ltd at its Mako gold mine.
In West Africa, AMS has increased its major mining equipment fleet
to over 500 units including dump trucks, excavators, loaders, blast
hole drills and grade control drills, along with 14 exploration drills.
The outlook remains positive as AMS is seeing a lift in exploration
drilling programs, particularly in West Africa.
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW 12
African Underground Mining Services (AUMS) 1
SEGMENT PERFORMANCE
EX TERNAL SALES
REVENUE
EARNINGS BEFORE
INTEREST AND TA X
18
145.2
17
89.9
18
31.0
17
19.8
$ MILLION
AUMS
1AUMS is an equity accounted joint venture for reporting purposes
Ausdrill has a 50% interest in the AUMS joint venture, with Barminco
holding the other 50%. This business provides underground mining
services for clients in Ghana, Mali, Burkina Faso and Tanzania.
The Company’s share of revenue from AUMS has increased
from $89.9 million to $145.2 million in the year to 30 June
2018, largely due to the commencement of the Subika project in
Ghana for Newmont in May 2017 and the expansion of the Geita
project in Tanzania for AngloGold Ashanti, mainly the Nyankanga
underground works.
EBIT increased from $19.8 million in FY17 to $31.0 million (being
Ausdrill’s 50% share) in FY18. This is largely as a result of the higher
revenue in FY18. Return on average capital employed improved
from 35.9% to 48.5%.
In Ghana, AUMS:
•
commenced a five-year contract in May 2017 to provide
underground mining services to Newmont Ghana Gold at its
Subika underground mine at the Ahafo complex in Ghana, which
had significant growth during FY18, in line with schedule.
• AUMS through its 70/30 JV with Rocksure International
(a Ghanaian mining contractor), is preferred contractor for
delivery of underground mining services at AngloGold Ashanti’s
Obuasi project in Ghana. Negotiation of the final contract terms
and conditions are well advanced with an expectation that
project works will commence later in 2018. The joint venture
has been incorporated in Ghana and will trade under the name
Underground Mining Alliance Limited.
In Tanzania, AUMS:
•
expanded its activities for the Geita project in Tanzania, especially
works in the Nyankanga pit.
In Burkina Faso, AUMS:
• was awarded a 70-month contract to provide underground
mining services to SEMAFO at its Siou underground mine in
Burkina Faso, expected to commence Q3, 2018; and
•
secured a 30-month contract renewal, with an option of
a 12-month extension, for the Zone 55 and Bagassi South
underground mines at Yaramoko, work commenced in Q3 2018.
Diamond drilling projects were also carried out in Ghana, Tanzania
and Burkina Faso during the year.
Key AUMS contracts:
The key clients and contracts in place at 30 June 2018 for the AUMS joint venture are:
CLIENT
Roxgold
AngloGold Ashanti
AngloGold Ashanti
Newmont Ghana Gold
SEMAFO
PROJECT
Yaramoko
Geita - Star and Comet
Geita - Nyankanga
Subika
Siou
LOCATION
Burkina Faso
Tanzania
Tanzania
Ghana
Burkina Faso
SERVICES PROVIDED
Underground mining
Underground mining
Underground mining
Underground mining
Underground mining
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW OPERATING AND FINANCIAL REVIEW
AUSDR IL L A NNUA L R EP OR T 2018
13
Drilling Services Australia
•
expanded works in the coal sector at Blair Athol and Dawson;
and
SEGMENT PERFORMANCE
•
added short-term works with growth potential.
$ MILLION
DSA
EX TERNAL SALES
REVENUE
EARNINGS BEFORE
INTEREST AND TA X
18
214.9
17
215.5
18
23.7
17
19.1
Drilling Services Australia (DSA) has reported an improved result
for the year in stabilising market conditions. EBIT margin was 11.0%,
an improvement on the prior period delivered through further cost
and productivity efficiencies. During the period, the business has
renewed several key contracts, secured additional new works, and
expanded capability in providing geotechnical services.
Looking forward, DSA will continue to focus on consolidation
initiatives and operational disciplines to optimise performance.
DSA has been active in developing a number of technology enablers
and the business will be seeking to deploy these initiatives to both
existing contracts and the pursuit of new opportunities by further
developing technological competitive advantages.
Drill and Blast
The provision of production drill and blast services to open cut
mining operations represents the foundation on which Ausdrill was
built and this continues to be an integral part of our service offering.
During the year, the business:
•
•
secured new works at the Wodgina Lithium mine for Process
Minerals International (PMI);
secured new grade control works at the Tropicana mine for
Macmahon;
•
extended the contract at Mungari for Evolution Mining;
The business has a large operational fleet comprising production
blast-hole drills, purpose-built probe drills and reverse circulation
(RC) grade control drills.
Exploration
The Australian exploration drilling business provides services
through its base in Kalgoorlie, which primarily focuses on gold and
base metals in the Goldfields region of Western Australia, and its
base in Perth, which services the North West of Western Australia.
This exploration business operates rotary air blast (RAB), reverse
circulation (RC), diamond drill rigs and water well rigs.
During the year, growth in exploration opportunities continued,
although margins remain suppressed due to excess capacity in
the industry.
Exploration drilling services were also delivered to a range of
clients in the Pilbara, Mid-West and Goldfields regions in Western
Australia, as well as term works in South Australia and campaign
works in New South Wales.
Geotechnical
During the year, DSA commenced the provision of geotechnical
services
including slope stabilisation, rockfall protection and
portal establishment focused on open pit mines and mining
infrastructure projects.
These services are complementary to DSA’s existing
in-pit
work activities and projects were delivered to both existing sites and
new clients.
DSA further extended its drilling capability to include geotechnical,
high reach and technical access slope work.
Key Contracts - Drilling Services Australia
The key contracts in place at 30 June 2018 for the Drilling Services Australia segment are:
CLIENT
KCGM
Ensham Resources
Link Mining Services
OM Manganese
Piacentini & Son
Macmahon
BHP Billiton
Gold Fields
Evolution Mining
SIMEC
PROJECT
Super Pit
Ensham
Blair Athol
Bootu Creek
Tropicana
Mungari
Various
Huntly and Willowdale
Huntly, WA
Process Minerals International (PMI) Wodgina
LOCATION
SERVICES PROVIDED
Goldfields, WA
Emerald, QLD
Clermont, QLD
Bootu Creek, NT
Production drilling, grade control
Production drilling
Drill and blast
Drill and blast
Drill and blast
Goldfields, WA
Pilbara, WA
Drill and blast, grade control
Drill and blast, grade control
Several Pilbara mine sites
Pilbara, WA
Exploration drilling, drill and blast, equipment hire
St Ives and Granny Smith
Goldfields, WA
Exploration drilling, grade control
Goldfields, WA
South Australia
Pilbara, WA
Goldfields, WA
Exploration drilling, drill and blast, grade control
Exploration drilling
Exploration drilling
Exploration drilling
Consolidated Minerals
Woodie Woodie
Mincor
Various
14
Equipment, Services & Supplies
BTP Group
SEGMENT PERFORMANCE
EX TERNAL SALES
REVENUE
EARNINGS BEFORE
INTEREST AND TA X
18
147.7
17
130.7
18
17.3
17
9.5
$ MILLION
ESS
The Equipment, Services and Supplies (ESS) segment comprises
the BTP Group and Supply Direct Group (SDG). The ESS segment
is experiencing improving market conditions resulting in increased
demand for equipment rental and maintenance support services.
Moving forward the ESS segment’s priority is to ensure it continues
to enhance its competitiveness and sustainability.
The ESS segment is experiencing
improving market conditions resulting in
increased demand for equipment rental
and maintenance support services
BTP Group (BTP) is one of Australia’s largest non-Original Equipment
Manufacturer suppliers of heavy earthmoving equipment solutions
to the mining and construction industries. BTP’s offering includes
maintenance and repair services, parts, reconditioned and service
exchange for major components, equipment rebuilds, equipment
rental and used equipment sales. BTP’s equipment rental offering
includes an extensive fleet of excavators, dump trucks, dozers,
graders and ancillary equipment, including water carts.
Improvement in financial performance is due to increased asset
utilisation, strong capital allocation disciplines, and ongoing cost-
control focus.
Market conditions generally improved during the year resulting in
increased rental fleet utilisation and higher demand for equipment
maintenance and support services.
During the year, BTP also completed the planned expansion of its
component rebuild facility and equipment workshop in Hazelmere,
Western Australia.
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW 15
All Other
$ MILLION
ALL OTHER
SEGMENT PERFORMANCE
EX TERNAL SALES
REVENUE
EARNINGS BEFORE
INTEREST AND TA X
18
13.8
17
11.7
18
6.0
17
(0.5)
includes MinAnalytical Laboratory
The All Other segment
Services, Energy Drilling Australia, Well Control Solutions and
Ausdrill Properties.
During the period, a $5.3 million claim settlement in Ausdrill’s favour
was received that relates to a prior period.
Diamond Communications -
reported as discontinued operations
On 1 May 2018, the Diamond Communications business was sold to
private group, Powerlines Plus Pty Ltd.
The sale generated a small book profit and was a further divestment
of a non-core business in line with Ausdrill’s strategy of rationalising
the Group in order to focus on mining.
Minanalytical Laboratory Services
MinAnalytical Laboratory Services offers a range of high quality
analytical services for the mineral exploration and mining Industry
and is NATA accredited in accordance with ISO17025:2005.
The business has invested in the commercialisation of the Chrysos
Photon Assay machine, which provides accurate mineral analysis
results within much-reduced timeframes.
Importantly, BTP’s unique value offering of end-to-end mining
equipment maintenance and refurbishment services puts it in
a good position to capitalise on a supply-constrained market.
Recent investment to expand BTP’s capacity and upskill its
workforce provides a strong platform for cost effective scalability.
BTP’s core capabilities in procuring, rebuilding equipment, cylinders,
components and engines; and provision of site and workshop
labour support will ensure that its customers end to end needs
are delivered upon. Equally important, BTP’s mining equipment
rental fleet also benefits from these same support structure which
ensures optimisation of its equipment availability and reliability
whilst operating on customer sites, particularly at a time when these
services may be more difficult to procure.
Moving forward, BTP’s focus remains on growing revenue profitably.
The mining industry is entering a modest reinvestment cycle which
is supporting improving market conditions for equipment pricing,
increasing mining equipment rental demand and related equipment
maintenance, and refurbishment services. BTP is actively seeking
to expand its mining equipment rental fleet and refurbishing owned
equipment in response to demand. BTP expects the market to remain
buoyant yet cost competitive in the near term and thereafter, to begin
to normalise to support new investment.
Supply Direct Group
Supply Direct provides flexible and effective supply chain and
logistics solutions predominantly to customers based in Africa,
where supply chain issues are often complex.
Supply Direct works with customers to find the best machinery and
parts supply source. Supply Direct’s managed machinery and parts
supply offering include a range of services from sourcing parts on
demand to providing fully integrated vendor-held stock models,
to tailor made solutions involving complex project management.
Supply Direct concluded the financial year with strong operational
and financial performance, and SDG expects this to continue. Moving
forward, SDG will continue to foster and develop relationships and,
together with strong collaboration with BTP, continue to provide
unique solutions to customers that meet their needs.
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW 16
The first Chrysos Photon Assay unit was commissioned during
May 2018 and generated its first revenue in June 2018. Full market
acceptance is expected following NATA accreditation, which is
expected to be achieved during August 2018. The business has
also made a conditional commitment to lease an additional two
units proposed for installation in the Kalgoorlie Goldfields region and
as part of that decision is looking at further automation of the
sampling process.
The Chrysos investment is seen as a catalyst for change for the
MinAnalytical business, with improved performance expected in FY19.
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.
The business will continue to incur depreciation, lease costs and
minimal labour costs until such time as the assets are divested at
the appropriate time and value.
Well Control Solutions (WCS)
WCS 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 has more recently,
seen an increase in activity in the coal seam gas sector.
The Chrysos investment is seen as a
catalyst for change for the MinAnalytical
business, with improved performance
expected in FY19.
Group financial position
Capital, funding and liquidity are managed at the corporate level,
with the individual businesses focused 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
18
52.6
(161.5)
78.3
(30.6)
166.7
1.2
137.3
17
94.6
(101.1)
(7.0)
(13.5)
181.9
(1.7)
166.7
CASH FLOWS FROM OPERATING ACTIVITIES
Operating cash flow for the year was $52.6 million, a decrease on
last year’s $94.6 million. Operating cash flows were impacted by
significant investment in working capital and mobilisation costs for
three new projects in Africa. Further, delayed payments of $45.9
million were received from debtors early in FY19.
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
10 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 $173.3 million for the period, driven
mainly by growth projects in Africa.
Further, during FY18 the Group divested non-core business,
Diamond Communications, for which it received sales proceeds of
$4.6 million, with a further deferred consideration of $1.6 million to
follow in FY19.
Proceeds from the sale of certain items of plant and equipment
which were surplus to operational needs totalled $3.3 million.
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW The following table shows Ausdrill’s acquisitions of property,
plant and equipment and other non-current assets funded from all
sources 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
18
(29.9)
(129.2)
(12.0)
(2.2)
3.3
17
(6.9)
(121.1)
(17.2)
(2.3)
1.8
(170.0)
(145.6)
From time to time, the Company engages in drill for equity
arrangements pursuant to which it undertakes drilling works for
clients in exchange for shares or debt instruments convertible into
shares. During the period, the Company invested $9.2 million into
drill for equity work programs and other investments, including
Chrysos and HiSeis (which amounted to $5.3 million).
Distributions from the AUMS joint venture totalled $13.6 million for
the year, lower than in FY17 ($22.9 million), due to dividends being
deferred to fund growth in AUMS.
CASH FLOWS FROM FINANCING ACTIVITIES
Net financing cash inflows were $78.3 million in the year ended
30 June 2018, compared to an outflow of $7.0 million in 2017.
The cash inflow included net proceeds of $97.6 million from an
equity raise that provided balance sheet flexibility, which were
partly offset by $19.9 million distributed to shareholders by way of
dividends in the period.
17
DIVIDENDS
is
influenced by earnings and cash
The level of dividends
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 2018, the Company paid a final dividend of 2.0 cents per
share for the year ended 30 June 2017 and an interim fully franked
dividend of 3.5 cents per share.
The Company’s revenues have stabilised and grown 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 in recent reporting periods and has
a strong cash position. Consequently, the Directors have elected
to declare a fully franked final dividend of 3.5 cents per share,
comprising a 1.5 cents per share final dividend and a 2.0 cents per
share special dividend for the full year ended 30 June 2018.
DEBT, GEARING AND OTHER FINANCING ARRANGEMENTS
At 30 June 2018, the Group had total borrowings of $404.6 million
(including prepaid borrowing costs and insurance premium funding).
Cash and cash equivalents totalled $137.3 million, resulting in net debt
of $267.3 million. The Company’s gearing ratio reduced to 25.7%.
In August 2017, the Group refinanced and up-sized its revolving
debt facility from $125 million to $200 million, of which $199.4
million was undrawn at 30 June 2018. The facility is a 3-year dual
currency facility maturing in July 2020.
In November 2012, the Group issued unsecured notes to the value
of US$300 million. These notes have a seven-year term and have
a fixed interest rate of 6.875% paid semi-annually.
The following table shows net debt and gearing ratios.
18
17
The Group’s residual debt comprises its US$ bonds which mature
in November 2019.
$ MILLION
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
18
17
Current trade and other
receivables
Inventories
Current trade and other payables
Net working capital
Increase/(decrease) in net
working capital
230.5
212.6
(122.8)
320.3
167.7
188.8
(100.4)
256.1
64.2
(22.2)
The Group’s year end working capital balance has increased
materially due to the major uplift in Group revenues driven by growth
in Africa and delayed debtor payments of $45.9 million which were
received early in FY19. New project start-ups required significant
investments in both working capital and equipment.
US$300 million unsecured notes
405.0
390.5
Insurance premium funding and
prepaid borrowing costs
Total borrowings
Cash and cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
(0.4)
404.6
(137.3)
267.3
774.8
1,042.0
25.7%
(1.9)
388.6
(166.7)
221.9
630.1
852.0
26.0%
Note: Columns may not add due to rounding
The US$ 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$0.7407 and, as a result
of the weakening A$ over the year, an amount of $14.5 million has
been included in the foreign currency translation reserve in relation
to borrowings. This loss 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, with significant
headroom.
Ausdrill’s debt structure provides the necessary liquidity for its
operations, including the cash advance facility of $200 million
expiring 2020.
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW 18
BALANCE SHEET
Cash and cash equivalents decreased by $29.5 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 Diamond Communications totalling $4.6 million were
received during the reporting period.
Trade and other receivables increased by $62.7 million or 37.4%
to $230.5 million due to the three new projects started in Africa as
well as delayed payments of $45.9 million received in early FY19.
Inventories increased by $23.8 million or 12.6% to $212.6 million
mainly driven by new work in Africa and higher AUD values of stock
due to a weakening Australian dollar.
The net value of Property, Plant and Equipment increased by $103.9
million due to the investment in capital expenditure for growth projects
in Africa, revaluation gain and favourable exchange gains. Capital
expenditure totalled $173.3 million and included expenditure in Africa
of $129.2 million. The revaluation gain totalled $5.7 million and the
exchange gain totalled $13.1 million. This was offset by depreciation
charges totalling $74.8 million, disposals of $6.4 million and other
movements totalling $7.1 million.
Trade and other payables increased from $100.4 million to $122.8
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 from $221.9
million at 30 June 2017 to $267.3 million at 30 June 2018, due to
the reduction in cash reserves. Capital expenditure was funded out
of operating cash flow and equity raise proceeds. The gearing ratio
reduced to 25.7%.
Total drawn borrowings (excluding prepaid borrowing costs and
insurance premium funding) of $405.0 million, increased by $14.5
million, mainly due to unfavourable exchange rate movements.
Employee obligations of $39.5 million decreased by $2.2 million
driven mainly by the cessation of the Siguri contract during FY18.
Shareholder equity increased to $774.8 million from $630.1 million.
During FY18 the Group received net proceeds of $97.6 million from
a capital raising, achieved a profit of $61.1 million and paid a final
dividend for FY17 of $7.2 million and an interim dividend for FY18 of
3.5 cents per share totalling $12.7 million.
The return on average capital employed increased to 10.7% for the
year to 30 June 2018 compared to 8.6% in the previous year and
reflects the increased profitability of the continuing operations. (This is
calculated as follows: EBIT divided by the sum of average receivables,
inventory, plant and equipment and investment in associates, less
payables).
The balance sheet of the Group remains strong with gearing levels
(net debt to total capital) of 25.7%, cash reserves of $137.3 million
and interest cover (EBITDA/Net Cash Interest) of 6.2 times and with
all debt covenants containing significant headroom. The net assets
of the Group increased by $144.6 million to $774.8 million during
the year, resulting in the net tangible asset position increasing from
$2.02 per share to $2.14 per share. The Group maintains financial
flexibility for growth through its cash reserves, its committed lines of
funding and strong access to capital markets.
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 in mind.
Pleasingly, the Company’s safety record continued to improve
during FY18 through continued engagement and commitment,
resulting in a 25% reduction in the number of recordable injuries
and a 41% reduction in the Total Recordable Injury Frequency Rate
(TRIFR) to record low levels.
The roll-out of in-house safety awareness-raising videos has been
completed. These videos have resulted in further engagement
of Ausdrill’s employees in consideration of safety matters, as the
videos which are based on employee case studies illustrate how
work related, non-work related and health related injuries and
illness can affect a range of people (incuding families), not just those
directly involved.
The videos have received very positive feedback from all
work teams, members of the management teams and clients.
Several of Ausdrill’s clients asked to show the videos to their
management teams.
Statistics
TRIFR: TOTAL RECORDABLE INJURY FREQUENCY RATE
20
15
10
5
0
DEC
13
JUN
14
DEC
14
JUN
15
DEC
15
JUN
16
DEC
16
JUN
17
DEC
17
JUN
18
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW People
EMPLOYEES
19
6,000
5,000
4,000
3,000
2,000
1,000
0
its
jointly owned entities across Australia and
Ausdrill and
Africa employ 5,278 employees, up from 4,582 as at June 2017.
This represents an increase of 15%, driven mainly by new projects
in Mali, Burkina Faso and Senegal that saw the African employee
numbers increasing to 4,206, from 3,503 at June 2017. Australian
numbers remained virtually unchanged.
This
reporting period provided challenging circumstances,
including the impacts of the Super Pit wall failure at Kalgoorlie,
the Wodgina project in the Pilbara and a security incident in Mali,
all requiring agile resource management.
Ausdrill is experiencing a tightening of the labour market generally
and specific challenges in securing talent in various occupational
segments reflecting an increasing labour cost pressure. The coming
year will see Ausdrill’s Employee Experience and People Strategy
evolve to meet these challenges following a review of recruitment
processes and remuneration and reward strategy.
Capturing and retaining talent along with the valuable aspects
of Ausdrill’s employment brand will continue to be a core
priority balanced against a renewed focus on agility, safety, robust
performance and reward.
Africa remains a great opportunity for development of Ausdrill’s
business, its people and the communities in which it operates.
Australia is also poised for progress and greater utilisation of
technological advances within the mining sector by Ausdrill’s
people in all divisions. With a renewed focus on reward aligned
to safety, robust performance and retention of key talent, Ausdrill
acknowledges that its people are the key to the successful execution
of its business strategy.
Communities
Ausdrill continues its culture of supporting communities through
its various giving initiatives and contributions, actual and in kind.
In Africa, Ausdrill supports and sponsors schools, orphanages and
sporting clubs.
Pleasingly, the Company’s safety record
continued to improve during FY18 through
continued engagement and commitment,
resulting in a 25% reduction in the number of
recordable injuries and a 41% reduction in the
Total Recordable Injury Frequency Rate
JUN
13
JUN
14
JUN
15
JUN
16
JUN
17
JUN
18
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW 20
Group business strategies and prospects
for future years
Strategies
Ausdrill’s longer term strategy is to further strengthen its market
position in the mining services industry in Australia and Africa by:
Focusing on its core services — Ausdrill will continue to transform
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 regards safety as priority number one.
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,
which is recognised by key clients. 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 Ausdrill’s 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 reputational 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 which 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.
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.
Prospects
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 Ausdrill 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.
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW 21
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.
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.
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 are 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.
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 2018, approximately 82% of mining
services revenues were generated from the provision of mining
services to gold mining companies and approximately 6% 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, iron ore
lithium, and coal mines.
Growth is dependent on mine operators seeking to expand
production at existing mines or bringing 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, Newmont, Gold Fields, Resolute, Perseus,
Toro Gold, Roxgold and SEMAFO. In the iron ore sector, the
Group’s largest client is BHP Billiton. Iron ore produced from
is amongst the most cost-competitive
BHP Billiton’s mines
seaborne iron ore fines in the world on a delivered to China basis.
In the coal sector, the Group’s largest client is Peabody Australia.
In the lithium sector, the Group’s largest client is Mineral Resources.
Ausdrill will continue to transform 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 ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW 22
SCALE OF OPERATIONS AND MIX OF ACTIVITIES
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 time.
Changes to labour laws and regulations (including, for example,
the introduction of maximum hours of service rules such as the
proposed Ghanaian Minerals Commission employment regulations
(8 hour rule)) may limit productivity and increase costs of labour.
If implemented and enforced, these types of changes to labour
laws and regulations could adversely impact revenues and, if costs
increase or productivity declines, operating margins.
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, nationalisation and localisation policies, 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.
REGULATORY COMPLIANCE AND CHANGE OF LAWS
The Group must meet regulatory requirements which are subject
to continual review, including inspection by regulatory authorities.
Failure to continuously comply with regulatory requirements,
or failure to take satisfactory corrective action in response to adverse
inspection, could result in enforcement actions and have adverse
financial consequences. The Group is also subject to changes to laws
and regulations in all jurisdictions in which it operates, which changes
can have a significant effect on operations and compliance costs.
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.
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW 23
Gold price chart (US$/A$)
1,900
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1,500
1,300
1,100
900
700
500
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07
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08
JUN
09
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10
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11
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GOLD (US$)
GOLD (A$)
Outlook4
The Group continues to focus 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 its clients.
The mining industry continues to experience strong competition in an
environment which is showing stable levels of activity in production
drilling and exploration in Australia, increasing demand for equipment
hire, parts sales and service exchange and continued growth in both
production and exploration activity in Africa.
In response to these market conditions, Ausdrill will:
• maintain its strong focus on safety
•
•
invest in higher barrier to entry businesses that deliver
sustainable profits to shareholders
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 will persist,
and margin pressure will continue in material parts of its business.
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 strong 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.
Notes:
1. Underlying excludes one off claim settlement , foreign exchange gains and transactions costs
2. Non-IFRS Financial Information
“EBITDA” is “Earnings before interest, tax, depreciation and amortisation, and significant items”;
“EBIT” is “Earnings before interest and tax and significant items”; and
“Operating profit” is profit /(loss) before significant items.
3. Statutory profit / (loss) is profit / (loss) after tax.
4. Disclaimer:
These materials include forward looking statements concerning projected earnings, revenue, growth, outlook or other matters for the financial year ending 30 June 2018 or beyond. Forward-
looking statements can generally be identified by the use of forward-looking words such as “may”, “will”, “expect”, “intend”, “plan”, “estimate”, “anticipate”, “believe”, “continue”, “objectives”,
“outlook”, “guidance” or other similar words and include statements regarding certain plans, strategies and objectives of management, trends and outlook. These forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause Ausdrill’s actual results, performance and achievements or industry results to differ materially from any
future results, performance or achievements, or industry results, expressed or implied by these forward-looking statements.
Forward-looking statements are based upon management’s good faith assumptions relating to the financial, market, regulatory and other relevant environments that will exist and affect Ausdrill’s
business and operations in the future. Ausdrill cannot give any assurance that the assumptions upon which management based its forward-looking statements will prove to be correct, or that
Ausdrill’s business and operations will not be affected in any substantial manner by other factors not currently foreseeable by management or beyond its control. Any forward-looking statements
contained in these materials speak only as of the date of these materials. Subject to any continuing obligations under applicable law or any relevant stock exchange listing rules, Ausdrill disclaims
any obligation or undertaking to publicly update or revise any forward-looking statement contained in these materials or to reflect any change in management’s expectations with regard thereto
after the date hereof of any change in events, conditions or circumstances on which any such statement is based. No representation or warranty, express or implied, is given as to the accuracy,
completeness, likelihood of achievement or reasonableness of any forecasts, projections or prospects referred to in these materials.
AUSDRILL ANNUAL REPORT 2018OPERATING AND FINANCIAL REVIEW
24 AUSDR IL L A NNUA L R EP OR T 2018
OPERATING AND FINANCIAL REVIEW
Corporate Directory
Directors
Ian Howard Cochrane
Chairman
Terrence John Strapp
Mark Andrew Hine
Robert James Cole
Alexandra Clare Atkins
Secretary
Efstratios Vassilios Gregoriadis
Chief Financial Officer and acting Chief Executive 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
Auditor
PwC
Level 15, 125 St George’s Terrace
Perth Western Australia 6000
Solicitors
Johnson Winter & Slattery
Level 4, 167 St Georges Terrace
Perth Western Australia 6000
Stock exchange listings
Ausdrill Limited shares are listed on the Australian Stock Exchange.
ASX CODE: ASL
Ausdrill Limited’s USD notes are listed on the Singapore Exchange
(SGX).
Website
www.ausdrill.com.au
FINANCIAL
REPORT
30 JUNE 2018
FOCUSED
26
44
45
46
47
Directors’ report
Auditor’s independence declaration
Corporate governance statement
Consolidated statement of profit or loss
Consolidated statement of
comprehensive income
48
Consolidated statement of financial position
49
Consolidated statement of changes in equity
50
Consolidated statement of cash flows
51 Notes to the consolidated financial statements
120 Directors' declaration
121
130 Shareholder information
132 Financials table
Independent auditor's report to the members
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 15 August 2018. 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
•• 26
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 2018.
Directors and Company Secretary
The following persons were directors of the Company during the financial year and up to the date of this report (unless indicated otherwise):
Ian Howard Cochrane (Chairman)
Terrence John Strapp
Mark Andrew Hine
Robert James Cole (appointed 14 July 2018)
Alexandra Clare Atkins (appointed 14 July 2018)
Donald James Argent (ceased on 13 July 2018)
Ronald George Sayers (Managing Director) (ceased on 3 July 2018)
Mark Anthony Connelly (ceased on 28 June 2018)
Terence Edward O'Connor AM QC (ceased on 5 December 2017)
After 24 years as a director of the Company, Terry O'Connor retired from the board on 5 December 2017, aged 80.
After more than 30 years' service with the Company, on 6 February 2018, Mr Ron Sayers announced his intention to retire within 12 months
and subsequently ceased as Managing Director on 3 July 2018, aged 66.
Mr Donald Argent resigned from his position as non-executive director of the Company on 13 July 2018, aged 71.
Mr Mark Connelly resigned from his position as a non-executive director of the Company on 28 June 2018 given increasing commitments in
his current portfolio of companies and other ventures, aged 55.
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.
Dividends - Ausdrill Limited
Dividends paid to members during the financial year were as follows:
Final ordinary fully franked dividend for the year ended 30 June 2017 of 2.0 cents (2016: nil) per fully paid
share paid on 18 October 2017
Interim ordinary fully franked dividend for the year ended 30 June 2018 of 3.5 cents (2017: 2.0 cents) per fully
paid share paid on 30 March 2018 (31 March 2017)
18
$’000
17
$’000
7,188
-
12,667
19,855
6,246
6,246
On 15 August 2018, the directors elected to declare a final ordinary dividend of 3.5 cents per share for the year ended 30 June 2018 (2017:
2.0 cents).
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 5 to 23 of this annual report.
Significant changes in the state of affairs
The Group entered into a sale agreement to sell the Diamond Communications business for $6.2 million which was completed on 1 May 2018.
The Diamond Communications business is reported as a discontinued operation in note 13 of this annual financial report.
The Group completed a $100 million equity raising during the year which was strongly supported by existing and new institutional investors
globally, providing significant balance sheet strength and flexibility, as disclosed in note 8(a) of the annual financial report.
There were no other significant changes in the state of affairs of the consolidated entity during the financial year ended 30 June 2018.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTDirector’s report
27
Events since the end of the financial year
On 15 August 2018, the directors declared the payment of a final ordinary dividend of $12,676,912 (1.5 cents per fully paid share dividend in line
with a 40% payout ratio on underlying profit and a special dividend of 2.0 cents per fully paid share to align with a payout ratio 40% of reported
profit, for a total dividend per fully paid share of 3.5 cents) to be paid on 18 October 2018 out of retained profits at 30 June 2018. The financial
effect of this transaction has not been brought to account at 30 June 2018.
On 15 August 2018, Ausdrill Limited (Ausdrill) entered into a binding agreement to acquire Barminco Holdings Pty Ltd (“Barminco”), a specialist
underground mining contractor with operations predominately in Australia as well as in Africa (through African Underground Mining Services
(AUMS)), Egypt and India. Barminco is one of Australia’s leading underground hard-rock mining contractors and is the Group’s long standing
joint-venture partner in AUMS. Ausdrill will acquire all of the equity and equity-like instruments in Barminco in exchange for 150.7 million fully
paid ordinary ex-dividend Ausdrill shares and $25.4 million in cash. This is equivalent to an equity acquisition price of $271.5 million and an
enterprise value of $697.0 million.
In order to reduce pro-forma gearing, the Group will undertake a fully underwritten accelerated non-renounceable entitlement offer to raise
approximately $250 million.
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 Group, the results of those operations, or the state of affairs of the consolidated entity in subsequent financial years.
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 5 to 23.
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.
Mr Ian Howard Cochrane BCom, LLB. Non-executive Chairman. Age 64.
Experience and expertise
Mr Ian Howard Cochrane was appointed as a non-executive director and Deputy Chairman on 23 November 2015. Subsequently, on 5
December 2017, Mr Cochrane was appointed as Chairman of the Board.
Mr Cochrane holds degrees in Commerce and Law. Mr Cochrane was educated in South Africa and immigrated to Australia in 1986. Mr
Cochrane 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. Ian 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. Ian has not
provided legal services to Ausdrill or any other entities since then.
Other current directorships
Non-executive director of Dacian Gold Limited from 2016.
Former directorships in last 3 years
None.
Special responsibilities
Chairman of the Board - effective 5 December 2017.
Deputy Chairman of the Board - until 5 December 2017.
Member of the Audit & Risk Committee - effective 5 December 2017.
Member of the Remuneration Committee - effective 5 December 2017.
Interests in shares and options
701,695 ordinary shares.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTDirector’s report 28
Information on directors (continued)
Terrence John Strapp CPA, SF Fin., MAICD. Non-executive director. Age 74.
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. Mr Strapp 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 Andrew Hine MAICD, MAusIMM. Non-executive director. Age 60.
Experience and expertise
Mr Mark Hine was appointed as a non-executive director on 24 February 2015.
Mr Hine is a Mining Engineer. Mr Hine 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. Mr Hine has extensive mining experience with over 25 years in senior
management roles in both surface and underground mining operations.
Mr Hine has held a number of senior positions in the mining industry including Chief Operating Officer at Griffin Mining Ltd, Chief Operating
Officer at Focus Minerals Ltd, Chief Operating Officer at Golden West Resources Ltd, Executive General Manager Mining at Macmahon
Contractors Pty Ltd, Chief Executive Officer at Queensland Industrial Minerals Ltd, General Manager at Consolidated Rutile Ltd and General
Manager Pasminco, Broken Hill / Elura Mines.
Other current directorships
None.
Former directorships in last 3 years
None.
Special responsibilities
Chairman of the Remuneration Committee - effective 5 December 2017.
Member of the Remuneration Committee.
Interests in shares and options
75,000 ordinary shares.
Mr Robert James Cole, BSc, LLB (Hons) Non-executive director. Age 56.
Experience and expertise
Mr Robert Cole was appointed as a non-executive director on 14 July 2018.
Mr Cole has over 30 years’ experience in the energy and resources industry. Mr Cole is a former executive director on the board of Woodside
Petroleum Limited and former managing director of Beach Energy Limited. Mr Cole is also a former Chairman of the Australian Petroleum
Production and Exploration Association. Prior to joining the oil and gas industry, Mr Cole was a partner in the law firm now known as King &
Wood Mallesons. Mr Cole is currently Chairman of Synergy, Chairman of Southern Ports Authority and Chairman of GLX Holdings Ltd.
Mr Cole holds Bachelor of Science and Bachelor of Laws degrees from the Australian National University in Canberra and is also a graduate of
the Harvard Business School Advanced Management Program.
Other current directorships
Non-executive director of Iluka Resources Ltd since March 2018.
Former directorships in last 3 years
Director of Beach Energy Ltd from March 2015 to February 2016.
Special responsibilities
None.
Interests in shares and options
None.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTDirector’s report 29
Information on directors (continued)
Ms Alexandra Clare Atkins, BE (Mineral Exploration & Mining Geology), Hon BE(Mining) MBA (Finance) FAusIMM (CP) GAICD
Non-executive director. Age 50.
Experience and expertise
Ms Alexandra Atkins was appointed as a non-executive director on 14 July 2018.
Ms Atkins is a mining engineer, geologist and geotechnical engineer with 28 years’ experience in the mining industry, and is a director of The
Australasian Institute of Mining & Metallurgy (The AusIMM). Ms Atkins has an MBA (Finance) from the Australian Institute of Business, is a
Chartered Professional Fellow of The AusIMM, and a graduate of the AICD and she holds Bachelor of Engineering Degrees from the University
of Queensland and WA School of Mines.
Ms Atkins has held various roles in the mining industry including as a Mining Engineer for Mt Isa Mines Ltd, Underground Miner for Plutonic
Resources, Underground Miner, Mine Engineer/Deputy Mine Manager and Geotechnical Engineer for Placer Dome, Construction Project
Engineer for Cairns Regional Council and Senior Mining Engineer for AMC Consultants. Ms Atkins has also worked as a District Inspector of
Mines for the WA Department of Mines & Petroleum, a Principal Mining Consultant for Optiro and was the Chief Operating Officer of PETRA
Data Science Pty Ltd, an artificial intelligence and machine learning software company servicing the mining industry. Ms Atkins has five years
of Not For Profit (NFP) Board experience with The AusIMM, Earth Science WA and Advocare Incorporated.
Other current directorships
None.
Former directorships in last 3 years
None.
Special responsibilities
None.
Interests in shares and options
None.
Donald James Argent BCom, CPA, FAICD. Non-executive director. Age 71.
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. Mr Argent 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 Practicing Accountant and a Fellow of the Australian Institute of Company
Directors.
Mr Argent resigned from his position as non-executive director of the Company on 13 July 2018.
Other current directorships
Non-executive director of Decmil Group Limited since 2018.
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTDirector’s report 30
Information on directors (continued)
Ronald George Sayers Managing Director. Age 66.
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. Mr Sayers was formerly the branch manager of a large mining supply group and has been involved with the mining industry
for over 40 years.
After more than 30 years' service with the Company, on 6 February 2018, Mr Sayers announced his intention to retire within 12 months and
subsequently ceased as Managing Director on 3 July 2018.
Other current directorships
None.
Former directorships in last 3 years
None.
Special responsibilities
Managing Director - until 3 July 2018.
Interests in shares and options
37,296,782 ordinary shares up to 26 February 2018.
Nil as at 30 June 2018.
Mr Mark Anthony Connelly BBus, MAICD. Non-executive director. Age 55.
Experience and expertise
Mr Mark Connelly was appointed as a non-executive director on 25 July 2012.
Mr Connelly has more than 29 years' of experience in the mining industry, and has held senior executive positions with Newmont Mining
Corporation and Inmet Mining Corporation. Mr Connelly 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. Mr Connelly was Chief Operating Officer of Endeavour Mining
Corporation following its merger with Adamus Resources, where he was Managing Director and CEO. Mr Connelly 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.
Mr Connelly resigned from his position as non-executive director of the Company on 28 June 2018.
Other current directorships
Non-executive director and Chairman of West African Resources Limited since September 2015.
Non-executive director and Chairman of Calidus Resources Limited since January 2018.
Non-executive director and Chairman of Tao Commodities Limited since May 2018.
Non-executive director and Chairman of Primero Group Limited since May 2018.
Former directorships in last 3 years
Non-executive director of B2Gold Corp from October 2014 to June 2016.
Non-executive director and Chairman of Toro Gold plc from September 2013 to January 2018.
Non-executive director of Tiger Resources Limited from December 2016 to July 2018.
Non-executive director of Saracen Mineral Holdings Limited from May 2015 to November 2017.
Non-executive director and Chairman of Cardinal Resources Limited from 2015 to October 2017.
Special responsibilities
Member of the Audit and Risk Committee - until 28 June 2018.
Member of the Remuneration Committee - until 28 June 2018.
Interests in shares and options
None.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTDirector’s report 31
Information on directors (continued)
Terence Edward O’Connor AM QC LLB (WA). Non-executive Chairman. Age 80.
Experience and expertise
Mr Terry O’Connor is a retired Barrister. Mr O'Connor 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.
Mr O'Connor 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 held the position of Chairman from 1993 until his retirement on 5 December 2017.
Other current directorships
Non-executive director of EBM Insurance Brokers Ltd from 1990.
Former directorships in last 3 years
None.
Special responsibilities
Chairman of the Board - until 5 December 2017.
Chairman of the Remuneration Committee - until 5 December 2017.
Member of the Audit and Risk Committee - until 5 December 2017.
Interests in shares and options
696,778 ordinary shares.
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 2018 and the
numbers of meetings attended by each director were:
FULL MEETINGS OF DIRECTORS
AUDIT & RISK
REMUNER ATION
MEETINGS OF COMMITTEES
Ian Howard Cochrane
Terence Edward O'Connor
Ronald George Sayers
Terrence John Strapp
Donald James Argent
Mark Anthony Connelly
Mark Andrew Hine
A
B
15
6
13
14
15
11
14
15
6
15
15
15
15
15
A
2
2
*
4
*
4
*
B
2
2
*
4
*
4
*
A
2
1
*
*
*
2
3
B
2
1
*
*
*
3
3
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 2018 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
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTDirector’s report 32
Remuneration report (continued)
(a) Key management personnel covered in this report
Non-executive and executive directors (see pages 26 to 31 for details about each director)
I H Cochrane
T J Strapp
M A Hine
R G Sayers
Other key management personnel
NAME
A G Broad
J Kavanagh
T Mlikota
R J Coates
D James
T E O'Connor
D J Argent
M A Connelly
POSITION
Chief Operating Officer - Australian Operations
Chief Operating Officer - African Operations
Chief Financial Officer and Acting Chief Executive Officer
Executive General Manager - Australian Mining Operations
Executive General Manager - Equipment Services and Supplies
(b) Remuneration policy and governance
Our Remuneration Committee is made up of independent non-executive directors. The Committee reviews and determines our remuneration
policy and structure annually to ensure it remains aligned to business needs and meets our remuneration principles. From time to time,
the Committee also engages external remuneration consultants to assist with this review. In particular, the Committee aims to ensure that
remuneration practices are:
competitive and reasonable, enabling the Company to attract and retain key talent;
aligned to the Company’s strategic and business objectives and the creation of shareholder value;
transparent and easily understood; and
acceptable to shareholders.
The Remuneration Committee is a committee of the Board. It is primarily responsible for making recommendations to the Board on:
non-executive director fees;
remuneration levels of executive directors and other key management personnel;
the over-arching executive remuneration framework; and
operation of the incentive plans which apply to executive directors and senior executives (the executive team), including key performance
indicators and performance hurdles.
The remuneration framework, its elements and link to performance are covered 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 $100,000, 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. $1.6 million was awarded to senior executives and management in relation to
financial and safety performance achieved during the financial year ended 30 June 2018.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTDirector’s report
33
Remuneration report (continued)
(c) Elements of remuneration (continued)
Short-term performance incentives (continued)
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 Short Term Inventive (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.
New executives are eligible to receive the cash bonus, if payable, in the financial year following the commencement of their employment with
the Group. There is no cash bonus payable where an executive's employment terminates prior to the end of the financial year.
Service bonus and profit share
A profit share bonus, linked to performance will be available to eligible employees who do not qualify for a STI cash bonus or other short-term
bonus under their employment contract. $2.1 million was awarded to employees in relation to financial and safety performance achieved
during the financial year ended 30 June 2018.
A service bonus which is available to eligible employees, excluding the Managing Director, is $1,000 per year of service plus superannuation.
The Remuneration Committee retains the right to vary this incentive, which it has chosen to do for the year ended 30 June 2018, varying it to
Nil, where it has not been specified under an enterprise agreement.
Long-term incentives
Long-term incentives are provided to certain employees via the Ausdrill Employee Option Plan which was approved by shareholders at the
2005 annual general meeting. Participation in the plan is at the Board's discretion and no individual has a contractual right to participate in the
plan or receive any guaranteed benefits. Under the plan, participants are granted options which typically only vest if the employees are still
employed by the Group at the end of the vesting period.
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 Group’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:
Inclusion 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);
Inclusion of a TSR performance vesting scale (previously none); and
Inclusion 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
0%
50th percentile
Between 50th and 75th percentile
50%
Pro-rata (sliding scale) percentage
At or above 75th percentile
100%
The peer group includes the following companies:
Austin Engineering Limited
Emeco Holdings Limited
Downer EDI Limited
Imdex Limited
MACA Limited
Monadelphous Group Limited
Boart Longyear Limited
Macmahon Holdings Limited
NRW Holdings Limited
Brierty Limited
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTDirector’s report
34
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 2018.
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
18
$000
17
$000
16
$000
15
$000
14
$000
890,317
764,950
74,079
59,349
1,701
61,050
1.84
1.84
16.9
0.5
16.6
0.5
44,622
30,951
250
31,201
0.72
1.84
9.9
0.1
9.6
0.1
744,635
26,578*
20,512
37,638
58,150
0.39
0.72
6.6
12.1
6.4
11.8
721,660
2,064*
(160,314)
(15,306)
(175,620)
0.86
0.39
827,860
34,430*
(43,859)
-
(43,859)
0.86
0.86
(51.3)
(13.6)
(4.9)
-
(51.3)
(13.6)
(4.9)
-
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTDirector’s report 35
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
Executive directors
R G Sayers
Other key management
personnel
A G Broad
J Kavanagh
T Mlikota
R J Coates
D James
Total executive directors
and other KMP remuneration
Total non-executive directors
remuneration
Total KMP
remuneration expense
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
FIXED REMUNERATION
VARIABLE REMUNERATION
CASH
SAL ARY
$
NON-
MONETARY
BENEFITS
$
LONG
SERVICE
LEAVE
$
POST-
EMPLOYMENT
BENEFITS
$
STI AND
SERVICE
BONUS *
$
OPTIONS
$
TOTAL
$
736,299
726,299
25,000
25,000
17,382
17,382
25,000
35,000
-
-
-
-
803,681
803,681
477,420
482,804
-
-
28,697
2,878
25,000
19,616
100,000
5,292
18,513
23,806
649,630
534,396
577,169
141,046
564,637
136,648
477,420
472,421
340,242
335,243
340,242
335,242
-
-
-
-
-
-
-
-
24,121
3,884
19,670
3,375
18,200
3,030
2,948,792
166,046
108,070
2,916,646
161,648
30,549
460,959
504,000
3,409,751
3,420,646
-
-
-
-
166,046
161,648
108,070
30,549
-
-
25,000
30,000
25,000
30,000
25,000
30,000
125,000
144,616
43,791
47,880
168,791
192,496
100,000
9,257
827,472
6,250
100,000
454
11,903
18,513
23,806
719,438
645,054
530,565
75,000
9,257
469,169
571
11,902
381,091
75,000
9,257
467,699
503
11,902
380,677
450,000
64,797
3,862,705
13,070
83,319
3,349,848
-
-
-
-
504,750
551,880
450,000
13,070
64,797
83,319
4,367,455
3,901,728
*
There will be a cash bonus payable for the year ended 30 June 2018. There was no cash bonus payable for the year ended 30 June 2017. 25% of the service
bonus was accrued and paid for the year ended 30 June 2017.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTDirector’s report
36
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
4 and 12 weeks of termination by either party unless 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
TERM OF
AGREEMENT
BASE SAL ARY
INCLUDING SUPER ANNUATION
TERMINATION BENEFIT*
Retired 3 July
2018
761,299
Ongoing
477,420
Ongoing
533,333
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 the
executive with 3 months' notice or
by the Company with 9 months'
notice or payment in lieu.
Contract can be terminated by the
executive with 3 months' notice or
by the Company with 9 months'
notice or payment in lieu.
Contract can be terminated by the
executive with 3 months' notice or
by the Company with 9 months'
notice or payment in lieu.
Contract can be terminated by the
executive with 3 months' notice or
by the Company with 9 months'
notice or payment in lieu.
Contract can be terminated by the
executive with 3 months' notice or
by the Company with 9 months'
notice or payment in lieu.
* There are no additional contractual differences.
(g) Non-executive director arrangements
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:
FROM 1 JULY 2015
Base fees
Chairman
Deputy Chairman
Other non-executive directors
Additional fees
Audit and Risk Committee - Chairman
Remuneration Committee - Chairman
$108,000
$90,000
$72,000
$9,000
$9,000
AUSDRILL ANNUAL REPORT 2018FINANCIAL 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
* T E O'Connor retired on 5 December 2017.
(h) Additional statutory information
YEAR
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
BASE FEE
$
54,000
108,000
100,306
90,000
72,000
72,000
72,000
72,000
72,000
72,000
72,000
72,000
442,306
486,000
AUDIT
COMMITTEE
$
REMUNER ATION
COMMITTEE
$
SUPER-
ANNUATION
$
-
-
-
-
9,000
9,000
-
-
-
-
-
-
9,000
9,000
4,500
9,000
-
-
-
-
-
-
-
-
5,153
-
9,653
9,000
5,558
11,115
9,529
8,550
7,695
7,695
6,840
6,840
6,840
6,840
7,329
6,840
43,791
47,880
37
TOTAL
$
64,058
128,115
109,835
98,550
88,695
88,695
78,840
78,840
78,840
78,840
84,482
78,840
504,750
551,880
(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 35:
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
FIXED REMUNER ATION
AT RISK - STI
AT RISK - LTI *
18
%
100
82
87
82
82
82
17
%
100
95
97
96
97
97
18
%
17
%
18
%
17
%
-
15
12
16
16
16
-
1
-
-
-
-
-
3
1
2
2
2
-
4
3
4
3
3
* As the long-term incentives are provided exclusively by way of options, the percentages disclosed also reflect the value of remuneration consisting of options, based
on the value of options expensed during the year.
(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 excercised during the year
2018
A G Broad
J Kavanagh
T Mlikota
R J Coates
D James
LTI OPTIONS
VALUE
GR ANTED
$
-
-
-
-
-
VALUE
EXERCISED
$
20,333
-
-
10,167
10,167
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTDirector’s report 38
Remuneration report (continued)
(h) Additional statutory information (continued)
(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
7 October 2013
7 October 2013
7 October 2013
VESTING AND
EXERCISE DATE
7 October 2015
7 October 2016
7 October 2017
EXPIRY DATE
7 October 2018
7 October 2018
7 October 2018
23 December 2015
23 December 2017
23 December 2020
23 December 2015
23 December 2018
23 December 2020
23 December 2015
23 December 2019
23 December 2020
20 April 2018
20 April 2018
20 April 2018
20 April 2018
20 April 2018
20 April 2018
20 April 2018
20 April 2018
20 April 2018
21 November 2018
21 November 2021
21 November 2019
21 November 2021
21 November 2020
21 November 2021
22 May 2019
22 May 2020
22 May 2021
12 June 2019
12 June 2020
12 June 2021
22 May 2022
22 May 2022
22 May 2022
12 June 2022
12 June 2022
12 June 2022
Options granted under the plan carry no dividend or voting rights.
EXERCISE
PRICE
VALUE PER
OPTION AT
GR ANT DATE
TSR
PERFORMANCE
ACHIEVED
% VESTED
$1.70
$1.70
$1.70
$0.25
$0.25
$0.25
$1.26
$1.26
$1.26
$1.33
$1.33
$1.33
$1.62
$1.62
$1.62
$0.12
$0.12
$0.12
$0.06
$0.07
$0.07
$1.63
$1.62
$1.61
$1.59
$1.58
$1.56
$1.40
$1.40
$1.39
< 50th percentile
75th percentile
75th percentile
75th percentile
to be determined
to be determined
to be determined
to be determined
to be determined
to be determined
to be determined
to be determined
to be determined
to be determined
to be determined
0%
100%
100%
100%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTDirector’s report 39
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 2018. All vested options were
exercisable.
2018
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
- 333,333 100%
333,333
-
-
-
-
-
-
- 166,666 100%
-
-
-
-
-
-
- 333,333 100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 166,666 100%
166,666
-
-
-
-
-
-
-
-
- 166,666 100%
166,666
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
333,333
333,334
166,666
-
-
-
166,666
166,668
333,333
-
-
-
-
-
-
-
-
-
333,333
333,334
-
166,666
166,668
-
166,666
166,668
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTDirector’s report
40
Remuneration report (continued)
(h) Additional statutory information (continued)
(4) Reconciliation of options and ordinary shares held by KMP (continued)
Figure 6: Shareholdings
2018
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
R Coates
BAL ANCE AT THE
START OF THE YEAR
RECEIVED DURING
THE YEAR ON
THE EXERCISE OF
OPTIONS
RECEIVED ON
VESTING OF RIGHTS
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
-
-
-
-
-
-
-
-
302,556
-
151,277
151,277
-
-
-
-
-
-
-
-
-
-
(307,507)
(37,296,782)
-
-
-
-
(243,000)
-
(151,277)
(151,277)
696,778
-
400,000
40,000
75,000
701,695
100,758
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 rented an office building from Mr R G Sayers until September 2017. 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 was also the non-executive chairman of Toro Gold and West African Resources
and Cardinal Resources.
B2Gold Corp., through its subsidiary Songhoi Resources Sarl entered into an exploration drilling contract with an Ausdrill Limited subsidiary,
African Mining Services Mali Sarl. Further B2Gold Corp., through its subsidiary Kiaka Gold Sarl entered into an exploration drilling contract with
an Ausdrill Limited subsidiary, African Mining Services Burkina Faso Sarl.
Cardinal Resources entered into an exploration drilling contract with an Ausdrill Limited subsidiary, African Mining Services Ghana.
West African Resources entered into an exploration drilling contract with an Ausdrill Limited subsidiary, African Mining Services Burkina Faso Sarl.
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. Mr Cochrane is not party to any contract negotiations for either party.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTDirector’s report 41
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*
(ii) Amounts recognised as expense
Rental office buildings
(iii) Amounts recognised as assets and liabilities
18
$
17
$
42,675,518
8,365,112
89,508
358,032
At the end of the reporting period, the following aggregate amounts were recognised in relation to the
above transactions:
Receivables
10,786,785
1,954,906
* The balance includes amounts up to Mr Connelly's resignation date from Cardinal Resources on 12 October 2017.
(7) Voting of shareholders at last year’s annual general meeting
In 2017, 99.52% 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
20 April 2018
20 April 2018
20 April 2018
7 October 2018
7 October 2018
23 December 2020
23 December 2020
23 December 2020
21 November 2021
22 May 2022
12 June 2022
$1.70
$1.70
$0.25
$0.25
$0.25
$1.26
$1.33
$1.62
66,666
100,002
733,331
3,033,317
3,033,366
400,000
200,000
200,000
7,766,682
No option holder has any right under the options to participate in any other share issue of the Company or any other entity.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTDirector’s report 42
Remuneration report (continued)
(h) Additional statutory information (continued)
Shares issued on the exercise of options
The following ordinary shares of Ausdrill Limited were issued during the year ended 30 June 2018 on the exercise of options granted under the
Employee Option Plan. No further shares have been issued since that date. No amounts are unpaid on any of the shares.
DATE SHARES ISSUED
30 September 2017
31 October 2017
31 October 2017
30 November 2017
27 December 2017
31 December 2017
31 December 2017
28 February 2018
28 February 2018
31 March 2018
30 April 2018
30 April 2018
28 May 2018
30 June 2018
Indemnification
ISSUE PRICE OF SHARES
NUMBER OF SHARES ISSUED
$0.50
$0.60
$0.53
$0.43
$0.25
$0.39
$0.07
$0.32
$0.07
$0.07
$0.07
$0.30
$0.25
$0.41
315,422
92,823
66,507
201,738
333,331
40,828
658,927
24,410
1,058,940
60,765
90,876
91,661
33,333
9,707
3,079,268
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
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTDirector’s report
43
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 44.
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.
Ian Howard Cochrane
Chairman
Sydney
15 August 2018
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTDirector’s report
44
Auditor’s independence declaration
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT 45
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 2018 corporate governance statement is dated as at 30 June 2018 and reflects the corporate governance practices in place throughout
the 2018 financial year. The 2018 corporate governance statement was approved by the Board on 15 August 2018. 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:
Ensure that all key tax controls, policies and procedures are documented and adhered to via regular monitoring, testing and maintenance;
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
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT
46
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
Other expenses from ordinary activities
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
18
$’000
17
$’000
890,317
22,345
(367,543)
(285,090)
(14,778)
(74,528)
(31,626)
(87,362)
22,344
74,079
(14,730)
59,349
1,701
61,050
61,050
61,050
764,950
12,468
(328,099)
(241,577)
(13,779)
(62,172)
(31,381)
(68,878)
13,090
44,622
(13,671)
30,951
250
31,201
31,201
31,201
CENTS
CENTS
16.9
16.6
17.4
17.1
9.9
9.6
10.0
9.7
NOTES
2
4(a)
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT Consolidated statement of comprehensive income
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
Exchange gains/(losses) on translation of joint ventures accounted for using the equity method
Items that will not be reclassified to profit or loss
Gain/(loss) on revaluation of land and buildings, net of tax
(Loss)/gain on revaluation of available-for-sale financial assets, net of tax
Other comprehensive income/(loss) for the year, net of tax
47
NOTES
18
$’000
17
$’000
61,050
31,201
(1,371)
3,671
4,443
(1,664)
5,079
882
(1,024)
(421)
(1,424)
(1,987)
8(b)
8(b)
8(b)
8(b)
Total comprehensive income/(loss) for the year
66,129
29,214
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
66,129
66,129
64,428
1,701
66,129
29,214
29,214
28,964
250
29,214
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT 48
Consolidated statement of financial position
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax receivables
Total current assets
Non-current assets
Receivables
Joint ventures accounted for using the equity method
Available-for-sale financial assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Employee benefit obligations
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Employee benefit obligations
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Other reserves
Retained earnings
Capital and reserves attributable to owners of Ausdrill Limited
Total equity
NOTES
18
$’000
17
$’000
6(a)
6(b)
7(a)
6(b)
14(b)
6(c)
7(b)
7(c)
6(d)
6(e)
7(d)
6(e)
7(c)
7(d)
8(a)
8(b)
8(c)
137,258
230,464
212,600
964
581,286
3,314
71,266
11,999
664,347
35,549
786,475
166,710
167,742
188,761
3,028
526,241
-
58,884
5,189
560,464
36,584
661,121
1,367,761
1,187,362
122,770
100,396
3,334
1,196
39,061
166,361
401,216
24,947
486
2,802
4,181
40,805
148,184
385,815
22,289
960
426,649
409,064
593,010
557,248
774,751
630,114
624,571
(12,459)
162,639
774,751
526,447
(17,777)
121,444
630,114
774,751
630,114
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
AUSDRILL ANNUAL REPORT 2018FINANCIAL 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 2016
Profit for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss) for the period
Transactions with owners in their capacity as owners:
Dividends paid
Employee share options - value of employee services
12(b)
8(b)
526,447
(16,028)
-
-
-
-
-
-
-
(1,987)
(1,987)
-
238
238
96,177
31,201
312
31,513
(6,246)
-
(6,246)
49
TOTAL
EQUIT Y
$’000
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
Profit for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss) for the period
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs and tax
Shares issued on conversion of employee share options
Dividends paid
Employee share options - value of employee services
8(a)
8(a)
12(b)
8(b)
Balance at 30 June 2018
-
-
-
97,516
608
-
-
98,124
624,571
-
5,079
5,079
-
(517)
-
756
239
61,050
-
61,050
-
-
(19,855)
-
(19,855)
61,050
5,079
66,129
97,516
91
(19,855)
756
78,508
(12,459)
162,639
774,751
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT 50
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)
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 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
Cash removed on disposal of subsidiary
Distributions received from associates
NOTES
18
$’000
17
$’000
892,394
(802,239)
90,155
2,990
(28,982)
(12,312)
742
52,593
802,207
(670,096)
132,111
2,391
(29,113)
(11,782)
1,006
94,613
(173,280)
(147,418)
3,319
(9,187)
-
4,600
(602)
13,633
1,780
(3,855)
3,207
22,213
-
22,946
9(a)
13
Net cash (outflow)/inflow from investing activities
(161,517)
(101,127)
Cash flows from financing activities
Proceeds from issues of shares, net of transaction costs
Repayment of hire purchase and lease liabilities
Proceeds from unsecured borrowings
Dividends paid to Company's shareholders
Repayment of unsecured borrowings
Net cash inflow/(outflow) 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 (refer note 9(b))
Cash flows from discontinued operations (refer note 13)
97,606
-
3,991
(19,855)
(3,458)
78,284
-
(471)
3,721
(6,246)
(3,969)
(6,965)
(30,640)
(13,479)
166,710
1,188
137,258
181,857
(1,668)
166,710
12(b)
6(a)
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
AUSDRILL ANNUAL REPORT 2018FINANCIAL 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
51
52
53
57
58
60
61
63
69
76
78
80
81
81
88
89
90
93
96
97
97
97
98
99
100
102
103
104
105
108
109
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT 52
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
53
57
58
60
61
63
69
76
78
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 53
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 and property holding services.
Corporate and Finance:
This segment includes Group central functions including treasury, accounting, human resources and administration.
In the prior 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 Diamond Communications business (2017: The Miners Rest Motel).
Information about discontinued businesses can be found in note 13.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 0
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AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
56
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.
Total revenue from continuing operations by geographical location is as follows:
CONSOLIDATED ENTITY
2018
2017
TOTAL
SEGMENT
REVENUE
$’000
INTER-
SEGMENT
REVENUE
$’000
REVENUE FROM
EX TERNAL
CUSTOMERS
$’000
TOTAL
SEGMENT
REVENUE
$’000
INTER-
SEGMENT
REVENUE
$’000
REVENUE FROM
EX TERNAL
CUSTOMERS
$’000
Drilling Services Australia
- Australia
220,594
(5,608)
214,986
229,147
(13,122)
216,025
Equipment Services & Supplies
- Australia
- Other foreign countries
Contract Mining Services Africa
- Ghana
- Burkina Faso
- Mali
- Senegal
- Guinea
- Other foreign countries
All Other Segments
- Australia
Corporate & Finance
- Australia
Total segment revenue
139,604
24,820
248,229
72,935
118,258
38,716
24,501
8,803
13,856
27,732
938,048
(8,076)
(8,640)
131,528
16,180
248,229
72,935
118,258
38,716
24,501
8,797
-
-
-
-
-
(6)
-
155,005
23,916
220,353
35,988
62,421
957
75,777
9,571
(35,694)
(12,462)
-
-
-
-
-
(43)
119,311
11,454
220,353
35,988
62,421
957
75,777
9,528
13,856
11,682
-
11,682
(25,401)
(47,731)
2,331
890,317
23,806
848,623
(22,352)
(83,673)
1,454
764,950
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 57
(d) Segment assets
Segment assets are measured in the same way as in the financial statements. These assets are allocated based on the operations of
the segment and the physical location of the asset. Total of non-current assets other than deferred tax assets, broken down by location
of the assets, is shown in the table below.
Drilling Services Australia
- Australia
Equipment Services & Supplies
- Australia
- Other foreign countries
Contract Mining Services Africa
- Ghana
- Burkina Faso
- Mali
- Senegal
- Guinea
- Other foreign countries
All Other Segments
- Australia
Corporate & Finance
- Australia
Total non-current segment assets
2 Revenue
From continuing operations
Sales revenue
Sale of goods
Services
Other revenue
Interest
(a) Revenue recognition
18
17
NON-CURRENT
SEGMENT
ASSETS
$’000
NON-CURRENT
SEGMENT
ASSETS
$’000
115,845
103,228
71,723
75
191,724
112,966
99,033
54,940
819
16,476
75,324
27
174,796
65,743
75,846
41,832
6,003
5,367
70,222
70,521
17,103
750,926
5,850
624,537
18
$’000
17
$’000
32,902
854,432
887,334
25,396
737,170
762,566
2,983
2,384
890,317
764,950
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 58
3
Individually significant items
(a) Impairment of non-current assets
For the year ended 30 June 2018, the Company assessed whether there were any indicators of impairment. The Company's market
capitalisation throughout the year was above its net assets, however, as at 30 June 2018 it was below its net assets. Based on the thorough
and systematic impairment analysis conducted, management remains of the view that the recoverable amounts of the Company’s non-
current assets are not sensitive to this factor. Rather, management considered the profitability of the Cash Generating Units (CGUs) against
their budgets. Where a business was performing below its forecast and had high underutilisation of PPE, management considered that
there was an impairment indicator and performed an impairment assessment for those CGUs. This was the case for the Ausdrill Northwest,
Energy Drilling Australia, Kalgoorlie / Synegex and Contract Mining Services Africa CGUs. For these CGUs, management has made
estimates associated with the recoverable amount of the relevant CGU to determine whether there was any impairment or reversal of
previous impairment in relation to its carrying value. Determining a CGUs 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 CGUs, the recoverability of its assets is completed via a fair value less costs of disposal methodology (FVLCD); and
(c) for certain CGUs, 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 budgeted 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 CGUs which had impairment triggers at 30 June 2018, some were assessed by a FVLCD method and some were assessed
via the VIU method and resulted in no impairment charge or reversal of previous impairment being recorded. For the year ended 30
June 2017 some of the CGUs were assessed by a FVLCD method and some were assessed via the VIU method and resulted in no
impairment charge being booked in the prior year. Please see the table below for the information on which method was applied to each
CGU and a comparison between 30 June 2018 and 30 June 2017.
Summary of the impairment taken, and method used to assess the impairment
A summary of the Company’s assessment of any indicators of impairment testing for material CGUs, the valuation method used and
impairment expense/(reversal) is as follows.
CGU
TRIGGER FOR
IMPAIRMENT TESTING
VALUATION
METHOD USED
IMPAIRMENT
EXPENSE/(REVERSAL)
OF PPE
18
17
18
17
18
17
Kalgoorlie / Synegex CGU
Ausdrill Northwest (ANW) CGU
BTP Equipment (BTPE) CGU
Contract Mining Services Africa (CMSA) CGU
Energy Drilling Australia (EDA) CGU
Y
Y
N
Y
Y
Y
Y
N
Y
Y
VIU
VIU
FVLCD
FVLCD
-
VIU
-
VIU
FVLCD
FVLCD
-
-
-
-
-
-
-
-
-
-
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 59
3
Individually significant items (continued)
(a) Impairment of non-current assets (continued)
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.
Kalgoorlie / Synegex CGU
This CGU is included in the Drilling Services Australia operating segment. At 30 June 2018, 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 2018. 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 was recognised at the CGU level at 30 June 2017.
Contract Mining Services Africa (CMSA) CGU
This CGU is included in the Contract Mining Services Africa operating segment. At 30 June 2018, 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 2018. 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.
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 2018, 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 2017.
ANW CGU (previously ANW and Connector CGU)
This CGU is included in the Drilling Services Australia operating segment. At 30 June 2018, 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 2017.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 60
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
Insurance proceeds
Management fee received
Foreign exchange gain (net)
Gain on sale of available-for-sale financial assets
Impairment reversal - trade receivables
Other(i)
(i)
The Group settled a claim and received $5.3 million net of GST during the current period.
(b) Breakdown of expenses by nature
Depreciation expense
Buildings
Plant and equipment
Total depreciation expense
Rental expense relating to operating leases
Finance costs
Hire purchase interest
Interest paid
Amortised borrowing cost
Total finance costs
Other expenses from ordinary activities
Freight
Consultants
Staffing, safety and training
Travel and accommodation
IT and communications
Other property related expenses
Insurance
Net loss on disposal of property, plant and equipment
All other expenses
18
$’000
1,544
1,047
11,249
-
425
8,080
22,345
17
$’000
2,209
1,240
4,747
934
347
2,991
12,468
18
$’000
17
$’000
1,703
72,825
74,528
1,629
60,543
62,172
6,264
6,511
-
28,856
2,770
31,626
18,737
15,802
11,376
9,581
6,927
6,734
6,645
1,635
9,925
68
28,914
2,399
31,381
15,816
12,004
9,869
7,023
5,900
6,419
5,028
3,713
3,106
Total other expenses from ordinary activities
87,362
68,878
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 61
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
Deferred income tax expense/(benefit) included in income tax expense comprises:
Decrease/(increase) in deferred tax assets
Increase/(decrease) in deferred tax liabilities
(b) Numerical reconciliation of accounting profit to income tax expense/(benefit)
Profit/(loss) from continuing operations before income tax expense
Profit/(loss) from discontinuing operations before income tax expense
Tax at the Australian tax rate of 30% (2017 - 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Share of net (profit) of joint ventures
Share-based payments
Other foreign permanent differences
Withholding tax
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)
NOTES
7(c)(i)
7(c)(ii)
NOTES
18
$’000
10,823
3,547
857
15,227
14,730
497
15,227
3,962
(415)
3,547
18
$’000
74,079
2,198
76,277
22,883
(6,703)
227
(192)
1,233
1,121
18,569
3,004
857
2,566
(7,378)
(2,935)
544
(3,342)
15,227
17
$’000
13,077
(991)
1,799
13,885
13,671
214
13,885
4,189
(5,180)
(991)
17
$’000
44,622
464
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
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 62
5
Income tax expense/(benefit) (continued)
18
$’000
17
$’000
(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 - debited/(credited) directly to equity
146
(412)
(d) Unrecognised temporary differences
(i) Temporary differences for which deferred tax assets have not been recognised:
Unused tax losses for which no deferred tax asset has been recognised
Other temporary differences
Unrecognised deferred tax assets relating to the above temporary differences
(ii)
Temporary differences relating to investments in subsidiaries for which deferred
tax liabilities have not been recognised:
Undistributed earnings
Unrecognised deferred tax liabilities relating to the above temporary differences
134,640
16,837
151,477
45,443
119,902
41,431
161,333
48,400
61,059
5,804
116,070
9,159
Ausdrill Limited has undistributed earnings of $61,059,261 (2017: $116,069,507) 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) 2018 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 2018 is 0% (30 June 2017: 0%). 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, 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 2017: 30.0%).
(ii) Global operations
The accounting effective company tax rate for the year ended 30 June 2018 is 20.0% (30 June 2017: 30.8%). This effective
tax rate is lower than the Australian company tax rate due to the impact of functional currencies, items of income which are not
assessable, capital gains, not recognising a portion of deferred tax assets and the impact of differences in overseas tax rates. The
effective tax rate excluding the impact of these items is 30.2% (30 June 2017: 33.8%).
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
63
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.
The Group holds the following financial instruments:
Financial assets
2018
Cash and cash equivalents
Trade and other receivables*
Available-for-sale financial assets
2017
Cash and cash equivalents
Trade and other receivables*
Available-for-sale financial assets
* Excluding prepayments.
** Fair value through other comprehensive income
Financial liabilities
2018
Trade and other payables
Borrowings
2017
Trade and other payables
Borrowings
NOTES
ASSETS AT
F V TOCI**
$’000
FINANCIAL
ASSETS AT
AMORTISED
COST
$’000
TOTAL
$’000
6(a)
6(b)
6(c)
6(a)
6(b)
6(c)
NOTES
6(d)
6(e)
6(d)
6(e)
-
-
11,999
11,999
-
-
5,189
5,189
137,258
137,258
213,727
-
350,985
166,710
151,969
-
318,679
213,727
11,999
362,984
166,710
151,969
5,189
323,868
LIABILITIES AT
AMORTISED
COST
$’000
TOTAL
$’000
122,770
404,550
527,320
100,396
388,617
489,013
122,770
404,550
527,320
100,396
388,617
489,013
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
64
6 Financial assets and financial liabilities (continued)
(a) Cash and cash equivalents
Current assets
Cash at bank and in hand
(i) Reconciliation to cash at the end of the year
18
$’000
17
$’000
137,258
166,710
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
137,258
137,258
166,710
166,710
(b) Trade and other receivables
2018
2017
CURRENT
$’000
NON-CURRENT
$’000
TOTAL
$’000
CURRENT
$’000
NON-CURRENT
$’000
TOTAL
$’000
Trade receivables
Provision for impairment of receivables
(see note 11(b))
Accrued revenue
Net GST / VAT receivables
Other receivables (ii)
Prepayments
141,917
(11,421)
130,496
50,973
12,654
16,290
20,051
-
-
-
-
-
3,314
-
141,917
122,746
(11,421)
(14,361)
130,496
50,973
12,654
19,604
20,051
108,385
34,104
5,242
4,238
15,773
167,742
230,464
3,314
233,778
-
-
-
-
-
-
-
-
122,746
(14,361)
108,385
34,104
5,242
4,238
15,773
167,742
Further information relating to loans to related parties and key management personnel is set out in note 18.
(i) Classification as trade and other receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Loans
and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. If collection of the amounts is expected in one year or less they are classified as current assets. If not, they are presented
as non-current assets. Trade receivables are generally due for settlement not more than 90 days from the date of recognition and
therefore are all classified as current. The Group’s impairment and other accounting policies for trade and other receivables are
outlined in notes 11(b) and 25(k) respectively.
(ii) Other receivables
This amount includes mobilisation costs, operating expense rebates and other receivables. If collection of other receivables is
expected in one year or less they are classified as current assets.
(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) and 11(b).
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 6 Financial assets and financial liabilities (continued)
(c) Available-for-sale financial assets
Available-for-sale financial assets include the following classes of financial assets:
Non-current assets
Listed securities
Equity securities
Unlisted securities
Equity securities
65
18
$’000
17
$’000
6,336
4,151
5,663
11,999
1,038
5,189
(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.
18
17
NOTES
$’000
$’000
(Losses)/gains recognised in other comprehensive income
8(b)
(2,377)
(2,034)
(iv) Non-current assets pledged as security
Refer to note 22 for information on non-current assets pledged as security by the Group.
(v) Fair value, impairment and risk exposure
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 18 April 2018, the Group, as part of a group of senior industry executives and other professional investors, together purchased
the majority of shares in mining services company HiSeis Pty Ltd ("HiSeis"), an end to end seismic hard rock exploration service
provider. The Company paid $3.9 million and has 19.9% of shares in HiSeis.
During the year, the Group purchased 29,305,516 shares in Golden Rim Resources totalling $1.0 million. The Group has a 9.2%
interest in Golden Rim Resources.
In 2017, the Group agreed with Azumah Resources Limited to the redemption and settlement of its $2.0 million convertible 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 either Australian Dollars, Great British Pound or Canadian Dollars.
For an analysis of the sensitivity of available-for-sale financial assets to price and interest rate risk refer to note 11(a).
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
66
6 Financial assets and financial liabilities (continued)
d) Trade and other payables
Current liabilities
Trade payables
Accrued expenses
Payroll accruals
Net GST / VAT payables
Other creditors and accruals
18
$’000
17
$’000
59,957
46,481
10,619
3,979
1,734
62,762
25,786
6,589
4,591
668
122,770
100,396
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.
(e) Borrowings
Unsecured
USD notes
Prepaid borrowing costs
Insurance premium funding
Total unsecured borrowings
(i) Secured liabilities
2018
2017
CURRENT
$’000
NON-CURRENT
$’000
TOTAL
$’000
CURRENT
$’000
NON-CURRENT
$’000
TOTAL
$’000
-
-
3,334
3,334
404,998
404,998
(3,782)
-
(3,782)
3,334
401,216
404,550
-
-
2,802
2,802
390,505
390,505
(4,690)
-
(4,690)
2,802
385,815
388,617
At 30 June 2018, the Group had the following facilities that were not drawn at balance date:
Total unutilised facilities - bank loans
Bank loans
18
$’000
17
$’000
199,433
124,776
In August 2017, Ausdrill Limited refinanced and increased its revolving debt facility from A$125 million to A$200 million.
The facility is a 3-year, dual currency, syndicated facility, maturing on 1 July 2020 and has been provided by a number of leading
lending institutions in the Australian banking market. As at 30 June 2018, this facility remains largely undrawn.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
67
6 Financial assets and financial liabilities (continued)
(e) Borrowings (continued)
(ii) Unsecured liabilities
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 November 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.
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 Ba3 (Outlook Stable) from Moody's and a credit rating of BB- (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.
(iii) Fair value
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:
2018
2017
CARRYING
AMOUNT
$’000
FAIR VALUE
$’000
DISCOUNT
R ATE
%
CARRYING
AMOUNT
$’000
FAIR VALUE
$’000
DISCOUNT
R ATE
%
On-balance sheet
Non-traded financial liabilities
USD notes
404,998
411,468
6.22
390,505
402,412
5.86
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
68
6 Financial assets and financial liabilities (continued)
(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 2018
Financial assets
Available-for-sale financial assets
Australian listed equity securities
Australian unlisted equity securities
CAD listed equity securities
GBP listed equity securities
Total financial assets
At 30 June 2017
Financial assets
Available-for-sale financial assets
Australian listed equity securities
Australian unlisted equity securities
GBP listed equity securities
Total financial assets
LEVEL 1
$’000
LEVEL 2
$’000
LEVEL 3
$’000
TOTAL
$’000
5,093
-
514
729
6,336
-
-
-
-
-
-
5,663
-
-
5,093
5,663
514
729
5,663
11,999
LEVEL 1
$’000
LEVEL 2
$’000
LEVEL 3
$’000
TOTAL
$’000
2,777
-
1,374
4,151
-
-
-
-
-
1,038
-
1,038
2,777
1,038
1,374
5,189
There were no transfers between any levels in the current or prior year.
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
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
6 Financial assets and financial liabilities (continued)
(f) Recognised fair value measurements (continued)
(iii) Fair value measurements using significant unobservable inputs (level 3)
The following table presents the changes in level 3 items for the period ended 30 June 2018:
Consolidated entity
Opening balance 1 July 2017
Acquisitions
Closing balance 30 June 2018
69
UNLISTED
EQUIT Y
SECURITIES
$’000
1,038
4,625
5,663
TOTAL
$’000
1,038
4,625
5,663
(iv) Valuation inputs and relationships to fair value
The fair value of the unlisted equity securities has been determined as its acquisition cost due to the acquisition proximity to 30
June 2018 and nothing has come to our attention that would impact this value. Opening balances have also been determined as
their acquisition cost and nothing has come to our attention that would impact this value.
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
(i) Assigning costs to inventories
18
$’000
12,558
9,208
190,834
212,600
17
$’000
14,903
16,421
157,437
188,761
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 $2,095,740 (2017: $2,003,328). These were recognised as an
expense during the year ended 30 June 2018 and included in materials expense in the consolidated statement of profit or loss.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
70
7 Non-financial assets and liabilities (continued)
(b) Property, plant and equipment
Non-current
At 1 July 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
Year ended 30 June 2018
Opening net book amount
Exchange differences
Revaluation of land and buildings
Additions
Disposal of subsidiary
Transfers to inventory
Depreciation charge
Disposals
Transfers between classes
Closing net book amount
At 30 June 2018
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
59,221
(1,801)
57,420
1,145,675
(715,520)
430,155
57,420
(503)
970
-
(1,629)
(2,374)
-
430,155
(3,856)
146,447
(2,119)
(60,603)
(5,513)
2,069
53,884
506,580
56,717
(2,833)
53,884
1,229,684
(723,104)
506,580
53,884
739
5,717
17
-
-
(1,703)
-
(46)
506,580
12,406
-
173,264
(1,476)
(7,064)
(73,072)
(4,945)
46
58,608
605,739
61,489
(2,881)
58,608
1,353,925
(748,186)
605,739
4,725
(2,468)
2,257
2,257
(7)
-
-
(181)
-
(2,069)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
560,464
13,145
5,717
173,281
(1,476)
(7,064)
(74,775)
(4,945)
-
664,347
1,415,414
(751,067)
664,347
(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 2018FINANCIAL 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
71
18
$’000
17
$’000
40,566
(14,734)
25,832
41,234
(13,220)
28,014
(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
Power station assets
5 - 25 years
2 - 10 years
3 - 20 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.
(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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
72
7 Non-financial assets and liabilities (continued)
(c) Deferred tax balances
(i) Deferred tax assets
The balance comprises temporary differences attributable to:
Employee benefits
Foreign tax credits
Accruals
Provision for obsolete stock
Doubtful debts
Depreciation
Other
Borrowing and business expenses
Current year tax losses recognised
Available-for-sale financial assets
Aggregate income tax expense
Total deferred tax assets
NOTES
18
$’000
17
$’000
11,352
12,677
-
1,339
2,837
3,658
3,909
110
825
2,593
4,591
7,194
23,095
27,990
1,089
1,361
1,772
4,222
108
407
1,059
1,574
27,317
29,564
8,232
35,549
21,394
5,923
27,317
7,020
36,584
22,375
7,189
29,564
Adjustment of deferred tax liabilities pursuant to set-off provisions
7(c)(ii)
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
EMPLOYEE
BENEFITS
$'000
DEPRECIATION
$'000
ACCRUALS
$’000
DOUBTFUL
DEBTS
$’000
OTHER
$’000
TOTAL
$’000
At 1 July 2016
(Charged)/credited to profit or loss
(Charged)/credited directly to equity
At 30 June 2017
10,988
1,689
-
12,677
10,995
(3,801)
-
7,194
(Charged)/credited to profit or loss
(1,325)
(3,285)
(Charged)/credited directly to equity
At 30 June 2018
-
11,352
-
3,909
811
14
-
825
514
-
1,339
4,696
(105)
-
4,591
(933)
-
3,658
6,514
(1,986)
(251)
4,277
1,067
1,715
7,059
34,004
(4,189)
(251)
29,564
(3,962)
1,715
27,317
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 73
NOTES
18
$’000
17
$’000
9,191
(2,395)
9,330
16,126
437
43
109
589
9,735
(2,461)
7,469
14,743
223
212
91
526
16,715
15,269
8,232
24,947
(1,807)
18,522
16,715
7,020
22,289
(1,935)
17,204
15,269
7 Non-financial assets and liabilities (continued)
(c) Deferred tax balances (continued)
(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
Unrealised foreign exchange
Prepayments
Total deferred tax liabilities
Adjustment of deferred tax liabilities pursuant to set-off provisions
7(c)(i)
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
At 1 July 2016
(Credited)/charged to profit or loss
Charged/(credited) directly to equity
At 30 June 2017
(Credited)/charged to profit or loss
Charged/(credited) directly to equity
At 30 June 2018
(d) Employee benefit obligations
FOREIGN ENTITIES
DISTRIBUTABLE
PROFITS
$’000
INVENTORIES
$’000
REVALUATION
OF LAND &
BUILDINGS
$’000
OTHER
$’000
TOTAL
$’000
9,743
(8)
-
9,735
(544)
-
9,191
2,117
(4,578)
-
(2,461)
66
-
(2,395)
7,884
(576)
161
7,469
-
1,861
9,330
544
(18)
-
526
63
-
589
20,288
(5,180)
161
15,269
(415)
1,861
16,715
2018
2017
CURRENT
$’000
NON-CURRENT
$’000
TOTAL
$’000
CURRENT
$’000
NON-CURRENT
$’000
TOTAL
$’000
Leave obligations
39,061
486
39,547
40,805
960
41,765
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
74
7 Non-financial assets and liabilities (continued)
(d) Employee benefit obligations (continued)
(i) Leave obligations
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 total current provision of $39,061,000 (2017: $40,805,000) 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.
The following amounts reflect leave that is not expected to be taken or paid within the next 12 months.
18
$’000
17
$’000
Current leave obligations expected to be settled after 12 months
23,379
21,305
(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) and 7(e)(ii)-(v).
LEVEL 1
$’000
LEVEL 2
$’000
LEVEL 3
$’000
TOTAL
$’000
At 30 June 2018
Assets
Land and buildings
Office buildings
Industrial sites
Total non-financial assets
At 30 June 2017
Assets
Land and buildings
Office buildings
Industrial sites
Total non-financial assets
-
-
-
-
-
-
-
-
-
-
-
-
7,695
50,912
58,607
7,695
50,912
58,607
8,366
45,518
53,884
8,366
45,518
53,884
There were no transfers between any levels for recurring fair value measurements during the current or prior period.
(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, see note 7(e)(v) for details.
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
75
7 Non-financial assets and liabilities (continued)
(e) Recognised fair value measurements (continued)
(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 and 30 June 2018 for recurring fair
value measurements:
Consolidated entity
Opening balance 1 July 2016
Acquisitions
Depreciation and impairment
Disposals
(Losses)/gains recognised in other comprehensive income
Closing balance 30 June 2017
Acquisitions
Depreciation and impairment
Revaluation
Transfers between classes
Gains/(losses) recognised in other comprehensive income
OFFICE
BUILDINGS
INDUSTRIAL
SITES
$’000
$’000
9,194
-
(634)
-
(194)
8,366
-
(660)
(320)
-
309
48,226
971
(995)
(2,374)
(310)
45,518
17
(928)
6,037
(46)
314
TOTAL
$’000
57,420
971
(1,629)
(2,374)
(504)
53,884
17
(1,588)
5,717
(46)
623
Closing balance 30 June 2018
7,695
50,912
58,607
(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
2018
$’000
30 JUNE
2017
$’000
38,140
37,080
DESCRIPTION
Industrial Sites
-Australia
Industrial Sites
-Ghana
12,772
8,438
Office
Buildings
-Ghana
7,695
8,366
R ANGE OF INPUTS
(PROBABILIT Y-WEIGHTED
AVER AGE)
VALUATION
TECHNIQUE
UNOBSERVABLE
INPUTS*
2018
2017
Income
capitalisation
Capitalisation
rate
7.25-11.75%
(7.77%)
7.75-17.5%
(8.99%)
Market rental
value per (m2)
$18-104 per
m2 ($48)
$33-81 per
m2 ($53)
REL ATIONSHIP OF
UNOBSERVABLE INPUTS
TO FAIR VALUE
The higher the
capitalisation rate, the
lower the fair value
The higher the market
rate, the higher the fair
value
Direct
comparison
m2
Selection of
industrial sites
with similar
approximate
utility
Direct
comparison
m2
Selection of
industrial sites
with similar
approximate utility
$24-1,284
per m2
($335)
$37-1,158
per m2
($339)
The higher the rate
per square metre, the
higher the fair value
$1,850 per
m2 ($1,850)
$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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 76
7 Non-financial assets and liabilities (continued)
(e) Recognised fair value measurements (continued)
(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 2018, 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.
8 Equity
(a) Contributed equity
Fully paid ordinary shares
362,197,492
312,277,224
624,571
526,447
18
SHARES
17
SHARES
18
$’000
17
$’000
(i) Movements in ordinary share capital:
Opening balance 1 July 2017
Contribution of equity, net of transaction costs and tax
Excercise of options under the Employee Option Plan
Balance 30 June 2018
(ii) Ordinary shares
NUMBER OF
SHARES
312,277,224
46,841,000
3,079,268
TOTAL
$’000
526,447
97,516
608
362,197,492
624,571
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the
number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a
poll each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
(iii) Dividend reinvestment plan
The Company has a dividend reinvestment plan under which holders of ordinary shares may elect to have all or part of their
dividend entitlements satisfied by the issue of new ordinary shares rather than by being paid in cash. The Board has determined
that the dividend reinvestment plan will be suspended until further notice and that all dividends, if any, be paid in cash.
(iv) Options
Information relating to the Ausdrill Limited Employee Option Plan, including details of options issued, exercised and lapsed during
the financial year and options outstanding at the end of the financial year, is set out in note 19.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
77
8 Equity (continued)
(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
TR ANSACTIONS
WITH NCI
$’000
FOREIGN
CURRENCY
TR ANSLATION
$’000
TOTAL
$’000
19,939
(7)
5,969
(2,664)
(39,265)
(16,028)
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
7(b), 6(c)
(515)
(2,034)
7(c)
94
-
-
610
-
-
(421)
(1,424)
Share-based payment expense
19
-
-
At 30 June 2017
19,518
(1,431)
Balance at 1 July 2017
Revaluation - gross
Deferred tax
Currency translation differences
Currency translation joint ventures
Other comprehensive income
Transactions with owners in their
capacity as owners
7(b), 6(c)
7(c)
19,518
5,717
(1,524)
250
-
(1,431)
(2,377)
713
-
-
4,443
(1,664)
Share-based payment expense
19
Shares issued on conversion of
employee share options
-
-
-
-
At 30 June 2018
23,961
(3,095)
(i) Nature and purpose of other reserves
Revaluation surplus - property, plant and equipment
-
-
-
-
-
238
6,207
-
-
-
-
-
-
-
(292)
1,174
(1,024)
(142)
(2,549)
412
1,174
(1,024)
(1,987)
-
238
(2,664)
(39,407)
(17,777)
6,207
(2,664)
(39,407)
(17,777)
-
-
-
-
-
756
(517)
6,446
-
-
-
-
-
-
-
-
(195)
(1,176)
3,671
2,300
-
-
3,340
(1,006)
(926)
3,671
5,079
756
(517)
(2,664)
(37,107)
(12,459)
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 and conversion of options.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 78
8 Equity (continued)
(b) Other reserves (continued)
(i) Nature and purpose of other reserves (continued)
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.
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.
(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
9 Cash flow information
NOTES
12(b)
18
$’000
17
$’000
121,444
61,050
(19,855)
-
96,177
31,201
(6,246)
312
162,639
121,444
(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
Loss/(gain) on sale of non-current assets
Net (gain)/loss 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)/decrease in trade debtors
(Increase)/decrease in inventories
(Increase)/decrease in deferred tax assets
(Increase)/decrease in other operating assets
(Decrease)/increase in trade creditors
(Decrease)/increase in provision for income taxes payable
(Decrease)/increase in deferred tax liabilities
(Decrease)/increase in other provisions
Net cash inflow from operating activities
18
$’000
61,050
74,775
1,626
(390)
-
(11,718)
(588)
(22,344)
756
(53,540)
(20,074)
2,065
(6,883)
30,972
(1,108)
883
(2,889)
52,593
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
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 79
9 Cash flow information (continued)
(b) Non-cash investing and financing activities
There were no non-cash investing and financing activities during the year (2017: nil).
(c) Net debt reconciliation
This section sets out an analysis of net debt and the movements in net debt.
Net debt
Cash and cash equivalents
Borrowings - repayable within one year
Borrowings - repayable after one year
Net debt
Cash and cash equivalents
Gross debt - fixed interest rates
Net debt
Net debt as at 1 July 2017
Cash flows
Foreign exchange adjustments
Other non-cash movements
Net debt as at 30 June 2018
18
$’000
17
$’000
137,258
166,710
(831)
(403,719)
(267,292)
137,258
(404,550)
(267,292)
BORROWINGS
DUE WITHIN
1 YEAR
$’000
BORROWINGS
DUE AFTER
1 YEAR
$’000
(559)
(388,058)
(221,907)
166,710
(388,617)
(221,907)
TOTAL
$’000
(559)
(2,319)
(34)
2,081
(831)
(388,058)
(221,907)
-
(14,617)
(1,044)
(32,959)
(13,463)
1,037
(403,719)
(267,292)
CASH
$’000
166,710
(30,640)
1,188
-
137,258
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 80
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
11
12
Critical accounting estimates and judgements
Financial risk management
Capital management
81
81
88
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 81
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 14 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 2018 (30 June 2017:
none).
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
Liquidity risk
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
82
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 and other assets
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 2018
4,203
10,802
-
262
44
-
1
-
382
45,289
729
-
(13,339)
(5,487)
(72)
(11,080)
(3,721)
-
-
(31,301)
9
2
-
-
-
1
-
-
(71)
-
-
-
514
-
-
-
19
-
(83)
-
USD
$’000
GHS
$’000
GBP
$’000
EUR
$’000
TZS
$’000
ZMW
$’000
ZAR
$’000
XOF
$’000
30 JUNE 2017
Cash
Trade and other assets
Available-for-sale financial assets
Trade payables
Borrowings
5,898
2,854
10,958
-
-
-
-
-
1,559
48,488
137
-
(12,931)
(8,963)
(76)
(3,788)
-
-
-
(71,836)
10
-
-
-
-
-
1,061
-
(65)
-
-
-
-
-
-
-
-
-
(221)
-
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:
17
18
$’000
$’000
Amounts recognised in profit or loss
Net foreign exchange gain/(loss) included in other income/other expenses
Total net foreign exchange gain/(loss) recognised in profit or loss before income tax for the year
11,249
11,249
4,747
4,747
Net gain/(loss) recognised in other comprehensive income (note 8(b))
Translation of foreign currency denominated operations
2,745
150
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
83
11 Financial risk management (continued)
(a) Market risk (continued)
(i) Foreign exchange risk (continued)
A 10 percent strengthening of the Australian dollar against the following currencies at 30 June would have increased (decreased)
pre-tax profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates,
remain constant. The analysis is performed on the same basis for 2017.
30 June 2018
USD
GHS
GBP
EUR
TZS
ZAR
CAD
XOF
30 June 2017
USD
GHS
GBP
EUR
TZS
ZAR
XOF
PROFIT OR
(LOSS)
A$’000
186
471
(59)
(299)
(2)
6
(47)
99
356
(432)
552
(6)
2,325
(2)
(116)
20
2,341
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 2018 and 2017, 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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 84
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.
53% (2017: 80%) of the Group's equity securities are publicly traded on the Australian Securities Exchange, the London Stock
Exchange and the Canadian Stock Exchange. The majority of the unlisted shares relate to the investment in HiSeis Pty Ltd, an end
to end seismic hard rock exploration service provider acquired in May 2018.
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 after tax. 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
18
$’000
840
(840)
17
$’000
363
(363)
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 publicly traded 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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 85
11 Financial risk management (continued)
(b) Credit risk
(ii) Credit quality (continued)
The Group’s maximum exposure to credit risk for receivables at the reporting date by geographic region was:
(AUD)
Australia
Africa
Asia
Europe
Trade and other receivables
Counterparties with external credit rating (Moody's)
A2
A3
Ba1
Ba3
Baa2
Baa3
B1
B3
Counterparties without external credit rating *
Group 1
Group 2
Group 3
Total trade and other receivables
The Group’s maximum exposure to credit risk for cash at bank and short term deposits was:
Cash at bank and short-term bank deposits
(AUD)
AA
AA-
A+
A
BBB+
BBB-
B
Other
18
$’000
73,902
139,392
263
170
17
$’000
79,248
72,489
229
3
213,727
151,969
212
11,941
77
7,773
9,502
2,377
-
331
2,729
7,499
6,807
-
3,868
17,797
6
-
32,213
38,706
13,893
167,621
-
181,514
213,727
100
107,149
1,114
4
1,474
874
26,422
121
137,258
537
112,726
-
113,263
151,969
124
120,107
904
945
2,314
-
42,235
81
166,710
*
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 86
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 2018, current trade receivables of the Group with a nominal value of $13,247,935 (2017: $14,474,644) were
impaired. The amount of the provision for impaired receivables was $11,420,595 (2017: $14,361,469). 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 (reversed)/recognised during the year
Receivables written off during the year as uncollectible
Discontinued operations removed
Unused amounts reversed (including currency impact)
At 30 June
18
$’000
422
12,826
13,248
14,361
(2,901)
43
(163)
81
11,421
17
$’000
61
14,414
14,475
14,726
(295)
2
-
(72)
14,361
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 2018, trade receivables of $56,670,523 (2017: $29,039,368) 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
18
$’000
54,846
1,825
56,671
17
$’000
28,143
896
29,039
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
87
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 debt facilities at the end of the reporting period:
Floating rate
- Bank loans
18
$’000
17
$’000
199,433
199,433
124,776
124,776
In August 2017, Ausdrill Limited refinanced and up-sized its revolving debt facility from A$125 million to A$200 million.
Refer note 6(e).
Maturities of financial liabilities
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.
Contractual maturities
of financial liabilities
Group - at 30 June 2018
Trade payables
Fixed rate
Total
Group - at 30 June 2017
Trade payables
Fixed rate
Total
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
122,770
15,037
137,807
-
13,685
13,685
-
417,640
417,640
100,396
14,000
114,396
-
13,443
13,443
-
24,399
24,399
-
-
-
-
403,929
403,929
-
-
-
-
-
-
122,770
122,770
446,362
404,550
569,132
527,320
100,396
455,771
556,167
100,396
388,617
489,013
Details about 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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 88
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 2018 and 30 June 2017 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
Final ordinary fully franked dividend for the year ended 30 June 2017 of 2.0 cents (2016: nil)
per fully paid share paid on 18 October 2017
Interim ordinary fully franked dividend for the year ended 30 June 2018 of 3.5 cents
(2017: 2.0 cents) per fully paid share paid on 30 March 2018 (31 March 2017)
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 2018 and 2017 were as follows:
(ii) Dividends not recognised at the end of the reporting period
18
$’000
17
$’000
404,550
388,617
(137,258)
(166,710)
267,292
774,751
1,042,043
221,907
630,114
852,021
26%
26%
18
$’000
7,188
12,667
19,855
19,855
18
$’000
17
$’000
-
6,246
6,246
6,246
17
$’000
In addition to the above dividends, since year end the directors have recommended the payment of
a final dividend of 1.5 cents per fully paid ordinary share and a special dividend of 2.0 cents per fully
paid ordinary share (2017: 2.0 cents). The aggregate amount of the proposed dividend expected
to be paid on 18 October 2018 out of retained earnings at 30 June 2018, but not recognised as a
liability at year end, is
12,677
7,188
(iii) Franked dividends
Franking credits available for subsequent reporting periods based on a tax rate of 30%
(2017 - 30%)
26,501
34,985
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
89
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
14
Discontinued operations
Interests in other entities
90
93
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
90
13 Discontinued operations
(a) Diamond Communications
(i) Description
The Group entered into a sale agreement to sell the Diamond Communications business for $6.2 million which was completed
on 1 May 2018. The sale includes all of the operational assets of the Diamond Communications business. 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 2018 and 30 June 2017.
17
18
$’000
$’000
Revenue
Expenses
Profit before income tax
Income tax (expense)/benefit
Profit after income tax of discontinued operation
Gain on sale of the subsidiary after income tax
Profit from discontinued operation
Other comprehensive income/(loss) from discontinued operation
Net cash inflow/(outflow) from operating activities
Net cash (outflow)/inflow 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
Deferred consideration *
Carrying amount of net assets sold
Gain on sale before income tax and reclassification of foreign currency translation reserve
Income tax expense on gain
Capital losses applied
Tax losses applied
Gain on sale after income tax
* An amount of $1,565,000 remains outstanding and is due for settlement no later than 1 May 2019.
13,770
(13,064)
706
(214)
492
-
492
492
(105)
(436)
436
(105)
17,931
(16,123)
1,808
(497)
1,311
390
1,701
1,701
524
(746)
(805)
(1,027)
18
$’000
4,600
1,565
(5,775)
(390)
(117)
-
117
390
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
13 Discontinued operations (continued)
(a) Diamond Communications (continued)
The carrying amounts of assets and liabilities as at the date of sale, 1 May 2018, were:
Property, plant and equipment
Cash
Trade and other receivables
Inventories
Deferred tax asset
Total assets
Trade and other creditors
Employee benefits obligations
Total liabilities
Net assets
(b) The Miners Rest Motel
(i) Description
91
18
$’000
1,899
602
4,811
164
-
7,476
1,140
561
1,701
5,775
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 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. 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 2018 and 30 June 2017.
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 (loss)/income 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
18
$’000
-
-
-
-
-
-
-
-
-
-
-
-
17
$’000
329
(507)
(178)
-
(178)
(64)
(242)
(242)
(181)
2,408
(2,341)
(114)
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
92
13 Discontinued operations (continued)
(b) The Miners Rest Motel (continued)
(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
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
(c) Drilling Tools Australia Pty Ltd
(i) Description
17
$’000
2,413
(2,477)
(64)
-
-
-
(64)
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 the Robit Plc Group. Completion of that sale occurred on 30 June 2016.
(ii) Financial performance and cash flow information
The outstanding proceeds from the sale of DTA totalling $19,800,000 as at 30 June 2016 were received during the prior
financial year.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 93
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 **
18
%
17
%
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 (1)
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 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 12 December 2017.
Australia
Burkina Faso
Australia
Mali
Guinea
Senegal
Ghana
Australia
Australia
Australia
Australia
Australia
Australia
Tanzania
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
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
* These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with ASIC instrument
2016/785. For further information refer to note 23.
** 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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
94
14 Interests in other entities (continued)
(a) Material subsidiaries (continued)
Mining Technology and Supplies Limited which is 100% owned by West African Mining Services Limited.
Supply Direct Pty Ltd which is 100% owned by Golden Plains Pty Ltd.
Supply Direct South Africa Pty Ltd 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 2018 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
18
%
17
%
CARRYING AMOUNT
18
$’000
17
$’000
African Underground Mining
Services
Ghana, Mali, Burkina
Faso and Tanzania
50
50
Joint
ventures
Equity
method
71,266
58,884
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.
(i) Commitments and contingent liabilities in respect of joint ventures
18
$’000
17
$’000
Commitments - joint ventures
Share of African Underground Mining Services capital commitments
9,604
19,672
Contingent liabilities - joint ventures
African Underground Mining Services did not have any contingent liabilities as at 30 June 2018 (30 June 2017: nil).
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 95
14 Interests in other entities (continued)
(b) Interests in joint ventures (continued)
(ii) Summarised financial information for joint ventures
Financial information for those joint ventures that are material to the Group is provided below. The information disclosed reflects
the amounts presented in the financial statements of the relevant joint ventures and not Ausdrill Limited’s share of those amounts.
They have been amended to reflect adjustments made by the entity when using the equity method, including fair value adjustments
and modifications for differences in accounting policy.
SUMMARISED BAL ANCE SHEET
Current assets
Cash and other cash equivalents
Other current assets
Total current assets
Non-current assets
Current liabilities
Financial liabilities (excluding trade payables)
Other current liabilities
Total current liabilities
Non-current liabilities
Net assets
Reconciliation to carrying amounts:
Opening net assets 1 July
Profit for the year
Other comprehensive income/(loss)
Dividends paid
Closing net assets at 30 June
Group share in %
Group share in $
Carrying amount
SUMMARISED STATEMENT OF COMPREHENSIVE INCOME
Revenue
Interest income
Depreciation and amortisation expense
Interest expense
Income tax expense
Profit from continuing operations
Profit for the year
Other comprehensive income/(loss)
Total comprehensive income
AFRICAN UNDERGROUND
MINING SERVICES
18
$’000
17
$’000
33,272
98,420
131,692
90,588
17,992
40,440
58,432
21,316
25,058
73,062
98,120
57,266
5,318
29,314
34,632
2,986
142,532
117,768
117,768
44,688
7,342
(27,266)
142,532
50.0%
71,266
71,266
290,434
1,874
(37,070)
(4,338)
(14,762)
44,688
44,688
7,342
52,030
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
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 96
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
16
17
Contingencies
Commitments
Events since the end of the financial year
97
97
97
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
97
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 lodged a claim in relation to a matter which at the date of this report is unresolved and is subject to litigation. The directors
are confident that a favourable outcome will be achieved. However, the contingent asset has not been recognised as a receivable at 30
June 2018 as receipt of this amount is dependent on the outcome of 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
18
$’000
17
$’000
10,393
16,111
The capital commitments are to be funded from cash and available finance facilities.
(b) Non-cancellable operating leases
The Group leases various offices and warehouses under non-cancellable operating leases expiring within one to six years.
The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.
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 Events since the end of the financial year
18
$’000
17
$’000
3,476
2,642
15
6,133
2,638
799
-
3,437
On 15 August 2018, the directors declared the payment of a final ordinary dividend of $12,676,912 (1.5 cents per fully paid share dividend
in line with a 40% payout ratio on underlying profit and a special dividend of 2.0 cents per fully paid share to align with a payout ratio 40%
of reported profit, for a total dividend per fully paid share of 3.5 cents) to be paid on 18 October 2018 out of retained profits at 30 June 2018.
The financial effect of this transaction has not been brought to account at 30 June 2018.
On 15 August 2018, Ausdrill Limited (Ausdrill) entered into a binding agreement to acquire Barminco Holdings Pty Ltd (“Barminco”), a
specialist underground mining contractor with operations predominately in Australia as well as in Africa (through African Underground
Mining Services (AUMS)), Egypt and India. Barminco is one of Australia’s leading underground hard-rock mining contractors and is
the Group’s long standing joint-venture partner in AUMS. Ausdrill will acquire all of the equity and equity-like instruments in Barminco
in exchange for 150.7 million fully paid ordinary ex-dividend Ausdrill shares and $25.4 million in cash. This is equivalent to an equity
acquisition price of $271.5 million and an enterprise value of $697.0 million.
In order to reduce pro-forma gearing, the Group will undertake a fully underwritten accelerated non-renounceable entitlement offer to raise
approximately $250 million.
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 98
Other information
This section of the notes includes other information that must be disclosed to comply with the accounting standards and other
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
99
100
102
103
104
105
108
109
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes 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 31 to 42.
(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
99
18
$’000
17
$’000
4,025,797
3,595,364
168,791
108,070
64,797
192,496
30,549
83,319
4,367,455
3,901,728
18
$’000
17
$’000
11,606,354
11,507,028
42,675,518
8,365,112
651,001
669,932
89,508
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 40 and 41.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
100
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
18
$’000
17
$’000
6,560,666
18,491,227
10,786,785
1,954,906
There were no loans to/from key management personnel during the year (2017: nil).
(g) Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates. Outstanding balances are unsecured and
are repayable in cash.
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 between 3.6 years and 5 years from their issue date. Options are granted under
the plan for nil consideration.
Options granted for nil consideration and settled in shares under the plan carry no dividend or voting rights.
Set out below are summaries of options granted under the plan:
18
AVER AGE
EXERCISE
PRICE PER
SHARE OPTION
NUMBER OF
OPTIONS
AVER AGE
E XERCISE
PRICE PER
SHARE OPTION
$0.66
$1.37
$1.09
$0.85
$0.39
$0.52
13,833,346
800,000
(5,733,329)
(1,133,335)
7,766,682
899,999
$0.85
$0.00
$0.00
$1.11
$0.66
$1.70
17
NUMBER OF
OPTIONS
16,100,015
-
-
(2,266,669)
13,833,346
1,966,654
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
No options expired during the periods covered by the above tables.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
101
19 Share-based payments (continued)
(a) Employee Option Plan (continued)
Share options outstanding at the end of the year have the following expiry date and exercise prices.
GR ANT DATE
07/10/2013
07/10/2013
23/12/2015
23/12/2015
23/12/2015
20/04/2018
20/04/2018
20/04/2018
20/04/2018
20/04/2018
20/04/2018
20/04/2018
20/04/2018
20/04/2018
EXPIRY DATE
07/10/2018
07/10/2018
23/12/2020
23/12/2020
23/12/2020
21/11/2021
21/11/2021
21/11/2021
22/05/2022
22/05/2022
22/05/2022
12/06/2022
12/06/2022
12/06/2022
EXERCISE
PRICE
SHARE
OPTIONS
30 JUNE 2018
SHARE
OPTIONS
30 JUNE 2017
$1.70
$1.70
$0.25
$0.25
$0.25
$1.26
$1.26
$1.26
$1.33
$1.33
$1.33
$1.62
$1.62
$1.62
66,666
100,002
733,331
3,033,317
3,033,366
133,333
133,333
133,334
66,666
66,666
66,668
66,666
66,666
66,668
1,966,654
1,966,692
3,299,982
3,299,982
3,300,036
-
-
-
-
-
-
-
-
-
7,766,682
13,833,346
Weighted average remaining contractual life of options outstanding at end of period
2.56 years
2.86 years
(i) Fair value of options granted
There were 800,000 options granted during the year ended 30 June 2018 (2017: nil).
The fair value at grant date is independently determined using either a Monte Carlo simulation or an amended Black Scholes
Merton methodology valuation.
The model inputs for options granted during the year ended 30 June 2018 included:
(a)
Options are granted for no consideration and vest based on Ausdrill's TSR rating with a peer group of selected companies for
the vesting periods below:
(b) vesting period - tranche 1 - 1/3 of options
215 days
(c) vesting period - tranche 2 - 1/3 of options
580 days
(d) vesting period - tranche 3 - 1/3 of options
946 days
397 days
763 days
1,128 days
$1.33
418 days
784 days
1,149 days
$1.62
$1.26
20 April 2018
20 April 2018
20 April 2018
21 November 2021
22 May 2022
12 June 2022
(e) exercise price
(f) grant date
(g) expiry date
(h) share price at grant date
$2.82
(i) expected price volatility of company shares
37.48%
(j) expected dividend yield
(k) risk free interest rate
1.94%
2.21%
$2.82
37.48%
1.94%
2.21%
$2.82
37.48%
1.94%
2.21%
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 102
19 Share-based payments (continued)
(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
20 Remuneration of auditors
18
$’000
17
$’000
756
238
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
(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
18
$
17
$
449,286
471,412
64,229
111,569
198,401
711,916
10,000
592,981
257,582
312,542
55,625
140,461
19,854
333,061
32,373
485,376
46,677
46,677
45,403
45,403
1,091,654
1,123,760
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL 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 basic earnings/(loss) per share attributable to the ordinary equity holders of the company
(c) Reconciliation of earnings used in calculating earnings per share
Profit/(loss) attributable to the ordinary equity holders of the Company used in calculating basic
and diluted earnings per share:
From continuing operations
From discontinued operations
(d) Weighted average number of shares used as denominator
103
17
CENTS
9.9
0.1
10.0
17
CENTS
9.6
0.1
9.7
17
$’000
18
CENTS
16.9
0.5
17.4
18
CENTS
16.6
0.5
17.1
18
$’000
59,349
1,701
61,050
30,951
250
31,201
18
17
NUMBER
NUMBER
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
Weighted average number of ordinary and potential ordinary shares used as the denominator
in calculating diluted earnings per share
351,782,137
312,277,224
5,932,674
7,978,121
357,714,811
320,255,345
(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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 104
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
Floating charge
Plant and equipment
Freehold land and buildings
Receivables
Investment
Total non-current assets pledged as security
Total assets pledged as security
18
$’000
17
$’000
133,294
204,448
198,440
536,182
544,807
58,607
3,314
83,265
689,993
165,321
158,889
183,179
507,389
468,128
53,884
-
64,073
586,085
1,226,175
1,093,474
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 105
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 International & Management Services Pty Ltd;
Ausdrill Finance Pty Ltd;
Ausdrill Northwest Pty Ltd;
Ausdrill Properties Pty Ltd;
Ausdrill Utilities 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;
MinAnalytical Holdings Pty Ltd;
MinAnalytical Laboratory Services Australia Pty Ltd;
Supply Direct Pty Ltd;
Supply Direct South Africa 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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 106
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 fee income/(expense)
Finance costs
Other expenses from ordinary activities
Share of net profits of joint ventures accounted for using the equity method
Profit from discontinued operations
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
18
$’000
17
$’000
641,603
20,463
(290,441)
(200,111)
(12,587)
(49,222)
5,473
(31,724)
(47,166)
22,344
1,701
60,333
(6,919)
53,414
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
53,414
17,747
Exchange differences on translation of foreign operations
4,404
528
Items that will not be reclassified to profit or loss
Gain/(loss) 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
4,443
(1,664)
7,183
60,597
39,124
53,414
-
(19,855)
72,683
(421)
(1,424)
(1,317)
16,430
18,880
17,747
312
(6,246)
30,693
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
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
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
107
18
$’000
17
$’000
113,000
164,846
153,868
186
431,900
31,202
296,208
11,999
430,175
49,928
819,512
143,145
122,295
142,575
3,155
411,170
98,250
112,624
5,189
407,308
42,085
665,456
1,251,412
1,076,626
91,426
3,334
228
31,564
126,552
403,770
35,820
486
440,076
566,628
83,825
-
2,194
25,509
111,528
391,022
31,813
742
423,577
535,105
684,784
541,521
624,571
(12,470)
72,683
684,784
526,447
(15,619)
30,693
541,521
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 108
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
(Loss)/profit for the period
Total comprehensive (loss)/income
18
$’000
17
$’000
65,511
465,422
530,933
26,072
6,392
32,464
57,726
485,340
543,066
23,474
6,957
30,431
624,571
526,447
909
6,446
104,904
(183,177)
(55,184)
498,469
(92,879)
(92,674)
704
6,206
104,904
(183,177)
57,551
512,635
(60,723)
(60,723)
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 not entered into any guarantees (2017: nil).
However, 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 2018 or 30 June 2017. For information about guarantees given
by the parent entity, please see (b) above.
(d) Contractual commitments for the acquisition of property, plant or equipment
As at 30 June 2018, the parent entity had contractual commitments for the acquisition of property, plant and equipment totalling
$4,828,712 (30 June 2017: nil). These commitments are not recognised as liabilities as the relevant assets have not yet been received.
(e) Pre-2015 Reserve
Each reserve of the parent entity has the same nature and purpose as described for the consolidated Group (in note 8(b)). In addition,
the parent entity on 30 June 2016 and 30 June 2015 established separate reserves for the purpose of paying future dividends. The
reserves are referred to as the “Pre-2015 reserve” and the “Accumulated losses - 2015 reserve”. On the date of establishment, the
“Pre-2015 reserve” had an amount of $114,273,000 transferred to it from retained earnings and the “Accumulated losses - 2015
reserve” had an amount of ($183,177,000) transferred to it from retained earnings.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 109
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 2017:
AASB 2017-2 Amendments to Australian Accounting Standards - Annual improvements to Australian Accounting Standards
2014 - 2016 cycle
AASB 107 Amendments to Australian Accounting Standards - Narrow scope amendments to statement of cash flows, and
AASB 112 Amendments to Australian Accounting Standards - Narrow scope amendments to income taxes.
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 2018
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 2018 financial year, A$Nil
(2017: 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. Based on the assessments undertaken to date, the group
expects a small increase in the loss allowance for trade debtors by approximately 1.0%.
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. The Group will apply the new rules
retrospectively from 1 July 2018, with the practical expedients permitted under the standard. Comparatives for 2017 will not
be restated.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 110
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 has assessed the effects of applying the new standard on the Group's financial statements and has identified
the following from the 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 2018 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 have considered whether a contract exists, whether the party to the contract is a customer, what the performance
obligations are, what the transactions 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.
The application of AASB 15 may result in the accounting for certain costs incurred in fulfilling a contract which did not qualify
for recognition as an asset under any of the other accounting standards. If the costs relate directly to the contract, generate
resources used in satisfying the contract and are expected to be recovered, they will therefore be eligible for capitalisation
under AASB15 and recognised as a contract asset as of 1 July 2018 (2018: nil).
The application of AASB 15 will also require additional disclosure requirements from 1 July 2018 including separate
presentation of contract assets in the balance sheet and costs to obtain or fulfil a contract.
Management has assessed the effect of applying the new standard on the Group's financial statements and does not expect
that there will be an impact on its consolidated financial statements for revenue recognition.
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 $6,133,000, see note 16. The Group estimates that approximately 38.4% 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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
111
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.
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 112
25 Summary of significant accounting policies (continued)
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The
chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has
been identified as the Board.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic
environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in
Australian dollars ($), which is Ausdrill Limited's functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets
and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss. They are
deferred in equity if they are attributable to part of the net investment in a foreign operation.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of
the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair
value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non-
monetary assets such as equities classified as available-for-sale financial assets are recognised in other comprehensive income.
(iii) Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have
a functional currency different from the presentation currency are translated into the presentation currency as follows:
assets and liabilities for each statement of financial position presented are translated at the closing rate at end of the
reporting period
income and expenses for each income statement and statement of comprehensive income are translated at average exchange
rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the dates of the transactions), 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).
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
113
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 4(b)). 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.
(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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
114
25 Summary of significant accounting policies (continued)
(h) Business combinations (continued)
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.
(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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
115
25 Summary of significant accounting policies (continued)
(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).
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
116
25 Summary of significant accounting policies (continued)
(m) Investments and other financial assets (continued)
(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.
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).
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 117
25 Summary of significant accounting policies (continued)
(o) Intangible assets (continued)
(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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 118
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 or an amended Black Scholes
Merton methodology 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
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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements
119
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 Legislative 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.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORTNotes to the consolidated financial statements 120
Directors' declaration
Directors' declaration
In the directors' opinion:
(a) the financial statements and notes set out on pages 46 to 119 are in accordance with the Corporations Act 2001, including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements,
and
giving a true and fair view of the consolidated entity's financial position as at 30 June 2018 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.
Ian Howard Cochrane
Director
Sydney
15 August 2018
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT Independent auditor's report to the members
121
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT 122
Independent auditor's report to the members
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT Independent auditor's report to the members
123
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT 124
Independent auditor's report to the members
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT Independent auditor's report to the members
125
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT 126
Independent auditor's report to the members
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT Independent auditor's report to the members
127
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT 128
Independent auditor's report to the members
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT Independent auditor's report to the members
129
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT 130
Shareholder information
A. Distribution of equity securities
Analysis of numbers of equity security holders by size of holding as at 13 July 2018:
HOLDING
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
There were 1,286 holders of less than a marketable parcel of 296 ordinary shares.
B. Equity security holders
The names of the twenty largest holders of quoted equity securities as at 13 July 2018 are listed below:
ORDINARY SHARES
NUMBER OF
HOLDERS
2,336
2,000
801
1,051
115
6,303
SHARES
782,427
5,305,911
6,127,564
28,554,777
321,426,813
362,197,492
NAME
1. HSBC Custody Nominees (Australia) Limited
2. J P Morgan Nominees Australia Limited
3. Citicorp Nominees Pty Limited
4. National Nominees Limited
5. CS Third Nominees Pty Limited
6. BNP Paribas Noms Pty Ltd
7. BNP Paribas Nominees Pty Ltd
8. BNP Paribas Nominees Pty Ltd
9. HSBC Custody Nominees (Australia) Limited
10. Zero Nominees Pty Ltd
11. BNP Paribas Noms Pty Ltd
12. CTS Funds Pty Ltd
13. HSBC Custody Nominees (Australia) Limited - A/C 2
14. Mr BG Wright + Mrs WJ Wright
15. Mrs Patricia Gladys Wright
16. Royal Blue Pty Ltd
17. Brispot Nominees Pty Ltd
18. CS Fourth Nominees Pty Limited
19. AMP Life Limited
20. Mrs PG Wright + Mr MG Wright + Mr JG Wright
ORDINARY SHARES
NUMBER HELD
PERCENTAGE OF
ISSUED SHARES
118,118,351
51,990,004
34,982,451
22,581,047
13,351,097
8,615,561
6,349,428
4,443,500
3,978,315
3,500,000
3,420,617
3,139,665
3,087,304
2,584,380
2,466,233
2,267,000
2,179,317
1,859,466
1,338,751
1,221,500
32.61%
14.35%
9.66%
6.23%
3.69%
2.38%
1.75%
1.23%
1.10%
0.97%
0.94%
0.87%
0.85%
0.71%
0.68%
0.63%
0.60%
0.51%
0.37%
0.34%
Total held by the twenty largest shareholders
291,473,987
80.47%
Unquoted equity securities
Options issued under the Employee Option Plan to take up ordinary shares
7,766,682
44
NUMBER HELD
NUMBER OF
HOLDERS
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT Shareholder information
C. Substantial holders
Substantial holders in the Company are set out below as at 13 July 2018:
NAME
1. FMR LLC
2. Pendal Group Limited
3. UBS Group AG
D. Voting rights
131
ORDINARY SHARES
NUMBER HELD
PERCENTAGE
27,908,079
19,258,655
18,156,560
7.71%
5.32%
5.01%
The voting rights attaching to each class of equity securities are set out below:
(a)
Ordinary shares: 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.
(b) Options: no voting rights.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT 132
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
$'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
%
%
%
#
14
15
16
17
18
826,305
1,555
827,860
719,832
1,828
721,660
743,003
1,632
744,635
762,566
2,384
764,950
887,334
2,983
890,317
173,656
110,793
126,536
135,791
(99,177)
74,479
(40,049)
34,430
(77,893)
(43,463)
(396)
-
(73,598)
37,195
(35,131)
2,064
(184,244)
(182,180)
21,866
(15,306)
(43,859)
(175,620)
312,277
312,277
(13.6)
(13.6)
312,277
312,277
(56.2)
(56.2)
(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
(62,172)
73,619
(28,997)
44,622
-
44,622
(13,671)
250
31,201
312,277
312,277
10.0
9.7
177,378
(74,528)
102,850
(28,771)
74,079
-
74,079
(14,730)
1,701
61,050
362,197
351,782
17.4
17.1
1,367,736
1,130,034
1,150,381
1,187,362
1,367,761
615,568
752,168
2.37
576,741
553,293
1.77
543,785
606,596
1.94
123,158
91,006
60,853
557,248
630,114
2.02
593,010
774,751
2.14
132,111
94,613
90,155
52,593
(101,127)
(161,517)
138,486
117,936
(738)
(104,693)
(47,772)
(6,965)
77,865
433,789
355,924
181,857
398,540
216,683
166,710
388,617
221,907
78,283
137,258
404,550
267,292
1.00
9,369
39
5.17
15.39
4,080
-
-
26
7.89
17.03
3,841
4.00
6,246
26
9.65
17.81
4,582
7.00
19,855
26
11.59
19.99
5,278
192,371
142,117
(56,223)
(101,209)
62,695
453,311
390,616
4.50
24,981
34
9.01
21.02
4,578
* EBITDA, EBIT and operating profit before income tax excludes impairment expense and discontinued operations.
AUSDRILL ANNUAL REPORT 2018FINANCIAL REPORT OPERATING AND FINANCIAL REVIEW
AUSDR IL L A NNUA L R EP OR T 2018
133
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