A ANNNUALL R
EPO
20
2
T
ORT
3
13
CONTENTS
Chairman’s Report ……………………………………………………………………………………………………………………..
Managing Director’s Report ……………………………………………………………………………………….………………
Regional Review …………………………………………………………………………………………………………………………
Board of Directors ……………………………………………………………………..………………………………………..……
Executive General Managers ………………………………………………………………………………………………………
1
3
8
13
14
Corporate Directory ……………………………………………………………………………………………….…………….….… 15
Directors' Report …………………………………………………………………………………………..…………………..…….… 16
Auditor’s Independence declaration………………………………………………………………………………………….
Consolidated Statement of Comprehensive Income …………………………………..……………………...………
Consolidated Statement of Financial Position ………………………………………………………………….…………
Consolidated Statement of Changes in Equity ……………………………………………………………...……………
Consolidated Statement of Cashflows …………………………………………………………………..……………………
Notes on the Financial Statements …………………………………………………………………..……………………
Directors’ Declaration…………………………………………………………………………………………..…………………..
Independent Auditor's Report …………………………………………………………………….…………………..…………
Corporate Governance Statement ……………………………………………………………….…………………..…..……
Shareholder Information ……………………………………………………………………………………………………………
30
31
33
34
35
36
71
72
74
85
CHAIRMAN’S REPORT
Dear fellow shareholders,
Over the past twelve months the industry in
which we operate has changed substantially.
for a mining
imperative
The overriding
company in recent years has been production
– increasing production from existing mines,
and developing new mines. With increasing
supply, commodity
demand outstripping
prices have been at historic highs.
in
To accelerate production, companies invested
field
exploration,
heavily
developments, brown field extensions, mining
equipment purchases, advisory services and
technology.
green
prices
In 2012 the industry recognised that this
“production at all costs” approach was
have
Commodity
unsustainable.
declined as supply has come more in line with
demand. The availability of cheap gas in the
USA has undermined the competitiveness of
coal as an energy source around the world.
The gold price has also been impacted by
monetary policy changes worldwide.
In
Australia in particular, the competitiveness of
many mines has been seriously eroded by
higher costs and less efficient mining practices
coupled with the high value of the Australian
dollar.
These changes triggered a major pull back in
production investment which was replaced by
a focus on cost cutting.
We have seen a major pull back in new capital
investments by the major mining companies.
The juniors have also been affected as capital
is now viewed as a scarce resource which is
focusing them on cash preservation rather
than expansion.
This drive
to reduce both capital and
operating costs throughout the mining supply
chain has had a major impact on suppliers to
the industry with small and large companies
announcing profit downgrades, asset write‐
downs and employee retrenchments.
We, like most contributors to the industry,
have been negatively impacted. Our advisory,
desktop software and
laboratory business
units have all seen a reduction in demand. Not
only has absolute demand dropped but
pricing competition has intensified which are
both driving down project margins.
In last year’s report I assured our shareholders
that we would closely monitor unfolding
dynamics within the market and respond
swiftly and decisively if needed, which we
have. As soon as it became apparent that
mining companies were changing
their
operational strategies, we reacted to reduce
our operating costs and capital expenditure.
result of
As a
restructuring activities
undertaken by Richard and his management
team the run rate of operating expenditure in
the 4th quarter of the year reduced by 27%,
or the annualised equivalent of over $24
million, from the comparative 4th quarter in
2012. As the majority of our costs are
employee related, this down‐sizing cost the
company $2.5 million in redundancy and $2.9
million
impairment and
in other one‐off
restructuring expenditure.
Right throughout this difficult process we
have ensured that we retained our core
capabilities and capacity. The Board believes
that our current cost structure
is now
appropriate
revenue
our
expectations but we will continue to remain
vigilant and monitor the industry situation
closely.
current
for
While we have reduced the operating costs of
the business, we have also invested in our
technology products. We have continued to
add additional features and functions to our
desktop suite of products, while at the same
time we have
two
Commodity Based Products (Underground
Coal and Open Cut Coal). We have also
delivered our first enterprise product (XERAS
for Enterprise) which is fully integrated with
SAP’s suite of corporate products. The Board
released our
first
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |1
CHA
IRMAN’
’S REPO
ORT
mly of
is
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the
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Th
he Board ha
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th
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year.
not to pay a
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ac
cknowledge
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the effort a
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and commitm
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Ch
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RUNGEPI
INCOCKMINARC
CO LIMITED // AN
NNUAL REPORT
T 2013 |2
MANAGING DIRECTOR’S REPORT
FINANCIAL RESULTS
The company’s financial performance in 2013
was a poor one. It became evident early in the
year that the demand for mining advisory
services, desktop software products and coal
gas exploration testing would be severely
impacted by the correction in commodity
prices and the associated reaction from the
mining companies and
financers to the
industry.
Group net revenue dropped by 26% to $73.9
million (2012: $99.3 million) with advisory and
consulting revenue decreasing by 30% to
$51.6 million (2012: $73.7 million). Software
license revenue finished the year at $6.8
million, 37% behind the previous year’s result,
however, software support revenue increased
by 15% to $11.3 million (2012: $9.8 million).
Laboratory testing and consulting revenue
from the GeoGAS business finished the year at
$8.4 million (2012: $11.4 million) a 27%
reduction from the previous year.
All operational areas of the business were
impacted by the sharp contraction throughout
the industry resulting in a net loss after tax of
$7.6 million which included $5.4 million in
one‐off restructuring and asset write‐downs.
Basic earnings per share decreased to a loss of
5.9 cents per share after last year reporting a
profit of 5.0 cents per share.
their
OPERATIONAL RESTRUCTURING
The overriding objective of our major
customers during the year was to reduce both
their capital and operating costs as quickly as
possible, thereby directly impacting revenue
in
included
supplier base which
ourselves. Our advisory business and GeoGAS
business are both sensitive to coal exploration
activities which were severely curtailed. There
in Mergers and
was also a
Acquisition activities as a result of the industry
coming to terms with the new economic
reality.
reduction
In the advisory space, there was both less
work available due to mining companies
having limited external consultants’ budget
and the work that was available was hotly
contested. While we certainly have a brand
that carries with it a premium, that premium
was
saw our
competitors quoting for work at prices which
appeared to be at or even under cost.
reduced markedly. We
Like other suppliers we also had to ‘do more
with less’ which meant reducing the number
of employees in the business, stop investing in
underperforming
insourcing
wherever possible and retendering essential
services.
activities,
Employee costs make up 72% of the total
operating costs for our business. At the end of
the financial year we had 341 employees
which
reduction of 28%
employees from the same period in the prior
year.
represents a
the year we closed down
business, GeoGAS
During
the
CORELATE
Brisbane
Lumpur Development
laboratory, Kuala
Centre and South American Advisory business.
We
insourced our Payroll Processing,
Leadership and Strategic Training, Executive
Coaching, Management Coaching,
Sales
Training, Presentation Training and Exit
Interviews. In the same way our customers
had us retender our services, we did so to our
suppliers, achieving
improved terms and
significant savings from new agreements
associated with the annual audit, insurance
brokerage contract and Microsoft support
contract.
in
the business such as
We also found ways to reduce the variable
costs
travel,
accommodation, professional fees and the
like. While the drive to be more and more
productive is never finished, we have made
significant progress over the last ten months.
GROUP MARKETING
2013 saw a complete rebuild of the marketing
the Company. The
department within
successful
company has a proud and
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |3
MANAGING DIRECTOR’S REPORT
engineering heritage which does not naturally
cultivate a commanding sales and marketing
focus. Following the re‐resourcing of the
marketing team, the external image of the
Company was our first priority. We continued
our investment in our new website which is
the store window to our business. Its modern
look and updated content, in both English and
Spanish, was a major
leap forward with
regards to how we present ourselves to the
marketplace as well as being an important
step in bringing our multiple brands together.
It replaced 11 websites which were either
dedicated to a specific product (e.g. XACT) or
previous company (e.g. Pincock Allen Holt).
The number of visitors to our website has
increased substantially as it has become the
central point of information for clients and
investors globally.
approved
2012 Company’s AGM,
changing
our
the
At
shareholders
the
Company’s name to RungePincockMinarco
which is a consolidation of the Company’s
three main brands. We used this name change
and brand consolidation to bring the business
together under one message and strategy.
Through this change, many of our clients
learnt that the Company they were dealing
with had a good deal more products and
services that could be of value to them. It
took less than a week for the Company to
start to be widely referred to as ‘RPM’.
The second half of the year was focused on
developing enterprise marketing collateral to
support our XERAS for Enterprise
launch.
Enterprise sales require a much higher level of
engagement and hence marketing promotion
and positioning. We have now delivered a
series of high quality videos and marketing
collateral
value
propositions of our products.
focusing on
key
the
Given the excellent progress that has been
made over the last twelve months, we are
now in a position to take more of a strategic
sales
marketing
approach
our
to
engagements, particularly with our
advisory and software engagement.
large
While we have looked to reduce costs across
the business we increased our investment in
Marketing because we believe that the
Company has hidden its bushel for far too
long.
RESEARCH AND DEVELOPMENT
Over the last year, we have concentrated on
four key software development areas, all of
which are interlinked.
Firstly, we had to deliver upgrades to our key
desktop mining products. Our customers pay
us maintenance fees to improve and protect
their past investments in our products so they
are always looking for new features and
functions to be
into these
products. During the second half of the year,
we released new versions of the following
desktop products ‐ TALPAC, XERAS, XPAC,
XACT and DRAGSIM.
incorporated
Secondly, we released (or rereleased) four
new desktop productivity tools to the market
which work with our other desktop products.
These were HAULNET, Block Aggregation
(BLOCKAGG),
Aggregation
(COALSEAMAGG) and Underground TALPAC.
Seam
Coal
to
their
specifically
junior miners and
Thirdly, we started building standalone
Commodity Based Solutions constructed on
top of our flagship XPAC product platform.
While XPAC can be used across all resource
commodities,
single
commodity miners really want a product that
caters
business
requirements. They want a solution that is
fully integrated with the necessary auxiliary
products (e.g. HAULNET) so that the product
is easy to use and simple to configure and
install. We believe these products will be
attractive to the juniors, the majors who want
to roll out a standard solution across multiple
mines and mining contractors in emerging
markets. In the second half of the year we
released ‘Underground Coal Solution’ which
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |4
MANAGING DIRECTOR’S REPORT
was our first solution to the coal industry and
in July 2013 we released our ‘Open Cut Coal
Solution’. These products were well received
however they will benefit from a turnaround
in sentiment towards coal.
Fourthly, in late calendar 2012, we committed
to a corporate strategy which
involves
migrating our successful mining desktop
applications to enterprise solutions which can
be run at the corporate level. To successfully
deliver on this strategy, there were a number
of investments the Company first needed to
make. A key one being to hire new people
into the business who truly understand, have
operated in and have been successful in the
world of enterprise software development,
which we did.
(that
‘XERAS
Right at the end of the year, and after a lot of
work by many people, we released our first
enterprise enabled product
for
Enterprise’. This product takes our existing
desktop product XERAS
is used
extensively
for budgeting across mining
operations) and provides seamless two way
industry standard integration with SAP ‐ the
ERP standard in the mining industry. XERAS
for Enterprise integrates SAP’s Financial and
Maintenance Management modules with the
financial modelling capabilities of XERAS. This
integration allows for unprecedented levels of
financial visibility and cost control, from
individual mine sites through to corporate
management
reporting systems. With a
centralised platform for conducting analysis
and generating different scenarios using
auditable and validated information, XERAS
for Enterprise bridges the gap between the
mine and the boardroom.
is a significant development
This
in the
evolution of our software business. It is a
product for the time and we have been very
encouraged by the response this product has
received to date given its launch during a
period of major austerity.
investment
Similarly to our Marketing area, we have
the company’s
increased
software products this year, as we believe it is
imperative that we get more products to
market more quickly than we have in the past.
in
MARKET DEVELOPMENT
As detailed above, we have
released
upgraded products, new products, our first
Commodity Based Products and our first
enterprise offerings, all of which have been
focused on delivering cost and productivity
improvements to our clients. While new
products are
important, so too are the
distribution channels used to deliver these
products to market. We have
looked to
broaden the accessibility of our products and
services, particularly into countries which we
have already made investments.
Memorandum
During the year we entered into a Strategic
Collaboration
of
Understanding with China Kingho Energy
Group (Kingho). Kingho is one of China’s
leading private mining and energy companies.
This agreement laid the foundation for RPM
and Kingho to become strategic partners as
Kingho takes its highly successful business
model globally, with a focus on Africa, the
Commonwealth of Independent States (CIS)
and Asia. Kingho has confirmed RPM as a
preferred supplier which gives Kingho access
to RPM’s global network of mining specialists
to provide expertise in project assessments
and development advisory, along with
operational support and technology services.
This agreement formalises an already strong
relationship between the two companies as
RPM’s Beijing Office has been providing
assistance on two smaller, long term Kingho
projects in Africa.
This year we entered into a Joint Venture with
Deepak Mining Services Private Limited
(‘Deepak’). Deepak are engaged
the
business of mining services in India and is a
wholly owned subsidiary of Deepak Fertilisers
and Petrochemicals Corporation
Limited
(’DFPCL’), a Public Limited Company. The Joint
in
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |5
MANAGING DIRECTOR’S REPORT
an
established
Venture
Indian‐based
incorporated company to pursue the delivery
of RPM’s software and advisory expertise
across the natural resource sectors of India,
Pakistan, Bangladesh, Sri Lanka, Nepal and
Bhutan. The new Joint Venture company is
well–positioned to take advantage of the
continually increasing demand for power and
steel in the Indian continent, which can only
be met by the application of best‐practice
advisory and technology products, for which
RPM is respected globally. As Indian resource
companies look to expand their supply of
natural resources from outside India, the local
Joint Venture will be able to capitalise on
RPM’s existing long‐term relationships with
global miners and investment houses, as well
as draw on the wealth of knowledge that
exists in the technical experts in the RPM
offices around the world.
software
Late
in the year we signed a strategic
distribution agreement with one of Russia’s
largest IT system integrators, CJSC NVision
Group (NVision Group). NVision Group is a
leader in integration services and consulting in
the Russian IT industry. Founded in 2001,
NVision Group has over 4,500 employees
operating out of 22 offices in Russia. NVision
Group boasts an extensive network of
business partners,
application
vendors and customers. They operate a large
SAP business unit and this agreement is their
first with a dedicated mining software
provider. Under this non‐exclusive agreement
NVision Group will sell and support RPM
software and solutions including its market
leading mine
financial
modelling products to customers in Russia
and the CIS. Working closely with RPM’s team
based in Moscow, NVision Group will leverage
local
thorough understanding of
their
of
and
customer
innovations and trends in the development of
provide
information
technologies,
comprehensive up‐to‐date solutions
that
meet mining’s unique challenges in these
regions.
scheduling and
knowledge
needs
to
Just after the end of the year we signed
another strategic distribution agreement, with
Information Technology Experts LLC
(IT
Experts), a Mongolian‐based mining software
consultancy firm. IT Experts was established in
2010 and proudly supports local and multi‐
national companies involved in the Mongolian
mining industry. Their team is comprised of
internationally
experienced Mongolian
professionals, allowing IT Experts to offer
international excellence to the sector. Under
this non‐exclusive agreement, IT Experts will
sell and support RPM software and solutions
including its market leading mine scheduling
and financial modelling products to customers
in Mongolia. This is an important step for the
growth of our Mongolian business as
it
complements RPM’s existing local team with a
key regional partner.
EMPLOYEES
It was a tough year for our employees who
saw many of their friends and colleagues
leave the business as we looked to right size
their
for
thank
the Company.
understanding during this difficult time.
them
I
imperatives of
RPM’s HR Strategy is based on the strategic
HR
leadership capability,
engagement and collaboration with the key
objectives being
the core
competencies of our employees, strengthen
our succession pipeline, reduce our attrition
rates and
increase our attractiveness to
potential employees.
increase
to
Over the past 10 months, we have been
focusing on management capability at all
levels of the business. Strong leadership, an
engaged workforce and collaboration across
the business are central
to successful
outcomes. Emphasis from HR has been placed
on the important non‐technical domains of
management: leading and managing people,
performance management, communicating,
resolving conflict and managing change.
A shift in management capability has been
evidenced by our ability to get the right
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |6
MAN
AGING
DIREC
CTOR’S
REPOR
RT
people i
nto the right
in relat
tion to em
e
Perf
in
increase
y poor pe
whereby
tolerate
d and addre
t job, make t
ployee cutb
formance
rformance
ssed accordi
the tough ca
backs and
Managemen
is no
long
ingly.
alls
an
nt,
ger
During
2013, RPM
Leadersh
hip Model b
ellence in r
of Exce
ment and t
develop
pabilities bet
and cap
capabilities
These c
ees and inc
employe
ndent
pub
indepen
ment,
manage
ment and
develop
the year
During
Indepen
ndent Publi
nce which
Excellen
onally helpfu
exceptio
s.
business
rolled out
built on dedi
relation to
the sharing
tween our o
are relevan
clude discip
report
blic
advisory,
business
we
rolle
c Reportin
has pro
ul in this ke
t a Capabil
icated Centr
collaboratio
of core ski
ffices global
t to all RP
lines such
ting,
ity
res
on,
ills
lly.
PM
as
ect
proje
are
softwa
nt.
developmen
he
t
ed out
of
g Centre
be
oven
to
he
ey area of t
he GeoGAS b
Th
ricing pressu
pr
sh
hare it will
co
ompetitive p
th
hrough supe
ervices.
se
business will
ure and giv
be importan
pressures an
erior custom
l likely rema
ven its high
nt for it to
nd differentia
mer and co
ain under
h market
react to
ate itself
onsulting
While we see
W
esktop prod
de
he release of
th
an
nd enterprise
AP and A
SA
ositioning as
po
th
he major m
ppreciate th
ap
he
earts and m
cross the ind
ac
o so.
do
little chang
ge in the dem
ucts, we are
e enthusiast
odity Based S
f our Commo
Our relations
e products. O
i
support
is
Accenture
enterprise v
s a credible e
s of the wo
ining house
ake time to
hat it will ta
he corporate
minds of th
we are determ
dustry but w
mand for
tic about
Solutions
ship with
ing our
endor to
orld. We
win the
e offices
mined to
ur cost st
O
im
mprovement
or a successf
fo
ructure an
s we have m
ul year ahea
d.
d the pro
made positio
oductivity
n us well
OOK
OUTLO
companies
g mining c
e expecting
We are
productiv
on
ocus
fo
to
e
continue
ad. We belie
he year ahea
ements in th
improve
remain und
ness will r
visory busi
our adv
e can contin
owever, if we
pressure, ho
pricing p
nd China, th
ts in India an
arge project
to win l
we will c
n.
hold our own
continue to h
to
ity
eve
der
ue
en
Ri
ichard Math
ews
Managing Dire
M
ector and Ch
hief Executiv
e Officer
RUNGEPI
INCOCKMINARC
CO LIMITED // AN
NNUAL REPORT
T 2013 |7
REGIONAL REVIEW
AUSTRALIA
Given the Australian mining companies focus
on reducing spend on external advisory
services in Australia, our advisory business has
been positioning itself to undertake more pre‐
feasibility (PFS), feasibility (FS) and life of mine
planning studies. This shift towards larger and
more detailed studies has been driven by the
desire to increase our book of work and to
utilise RPM
in our advisory
consulting work. These types of studies, due
to their size and level of detail, best enable
the use of RPM software.
software
Acknowledging that client demand in the
PFS/FS market will not be strong in Australia
in the near term, we are shifting our business
development focus to developing markets
(e.g. India, Africa and Russia) for this style of
work. Our efforts to date, which have
predominately been in India, have been well
received.
in assisting companies
Within Australia, given current commodity
prices and the high operating cost base of
many mines, we believe there will be
to
opportunities
understand their project’s economic drivers
and then complete updated life of mine plans
to increase operating margins. Although few
companies appear to have taken this step to
date, once the initial cost cutting measures
and in‐house mine optimisation processes are
completed, we anticipate that some operators
will seek external assistance.
that as
2013 saw a major pull back in Independent
Technical Reviews
and Technical Due
Diligence studies. This was driven by a
reduction in M&A activity during the year. We
anticipate
the Australian dollar
weakens and as junior and mid‐tier miners
become more cash strapped, M&A activity
will increase. Based on our recent experience,
investment activity appears to be coming
from Korea, China, India and, to a lesser
extent, Japan.
RPM have successfully partnered with larger
infrastructure groups throughout 2013. We
believe strategic partnering will be a key
factor in our success on larger projects in
2014.
Our software revenues in Australia were poor
and nowhere
in our business was the
differentiation between the coal sector and
the iron ore sector more pronounced. The
coal miners focused on absolute variable
expenditure, which negatively impacted our
revenues, however the
iron ore miners
viewed variable expenditure in relative terms
which positively
revenue
streams. Unfortunately the reduction in coal
outweighed the increase in iron ore.
impacted our
2014 will see our sales strategy and effort
focused on finding new markets and new
opportunities. The development and release
of the Commodity Based Solutions is the first
step in the execution of this strategy. The
solution
new
opportunity for RPM as we are able to sell
these to both new and existing customers.
represent
products
a
in
XERAS for Enterprise (X4E) and XACT for
Enterprise (A4E) represent significant product
differentiation
for RPM.
Considerable marketing and promotion effort
will be provided to these products as we lay
into the
the
corporate systems arena.
for our entry
the market
foundation
ASIA
Indonesian market continues to be
The
impacted by government changes in local
exportation laws which impact particularly
metals projects. As a large global exporter of
coal, the reduction in the coal price has
hindered their coal
it has
Australia. Late in the year we saw a slight
increase in M&A activity as clients started
early stage exploration having had two years
to digest the government changes. Large
miners in Indonesia are focused on margin
industry, as
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |8
REGIONAL REVIEW
preservation which is resulting in life of mine
planning work for both our advisory and
software teams. The Indonesia business will
continue to focus on both the Advisory and
Software space during 2014 with a view to
expanding in South East Asia and growing our
‘local’ Indonesian market share.
advisory
revenue.
Delays in Hong Kong Exchange transactions
during the year significantly impacted on our
Chinese
Increased
competition from Australian and recently
established Asia‐based consulting firms is also
putting pressure on project margins for listing
style work. Focus will be given to SOEs and
large accounts with whom we already have
established relationships to further develop
the range of work undertaken by RPM for
them. To date, this work has been primarily
focused on financial transactions and needs to
shift to more operational style advisory work
where opportunities for exposure to our
software can be generated.
Our Hong Kong business is continuing to build
close relationships with our key market
segments including long term existing Asian
listed clients, Financial Institutions and Private
Equity funds. Through our presence in Hong
Kong, we are gaining exposure to a broader
client base
in both Hong Kong and the
remainder of South East Asia, Japan and
Korea, to the benefit of the broader RPM
business through jobs won. Hong Kong is a
well‐established hub of funding for mining
projects; our Hong Kong office is leveraging
our existing global office client network to
provide introductions to various finance and
investment
in Hong Kong to
improve our client experience. This approach
maintains
client
cross
management approach which is preferred by
our clients and will ensure RPM recognition as
a global brand.
institutions
regional
our
from
Ongoing
negative
towards
international mining
Mongolia are forecast to continue into 2014
as the new government works through key
sentiment
investors
issues with the Oyu Tolgoi (OT) and Tavan
Tolgoi (TT) agreements. Competitor activity
has dropped as less established firms pulled
out of the country during 2013 due to lack of
work. The key objective for the Mongolia
business in 2014 is to ensure that we maintain
our presence and networks in the market
through regular communication with both
local Mongolian and international investors in
country. Projects are still being developed by
a number of foreign funded companies and
we have positioned ourselves to secure work
from these clients for both geological advisory
and mine planning style work. The office will
continue to provide geological advisory work
introduction to new
which provides an
likely to either move
projects which are
towards development where our mine
planning and software can be leveraged or
towards financial transactions through our
in the various financial mining
presence
markets. We expect our new relationship with
IT Experts, who were appointed as a
distributor and partner in Mongolia in early
August, to bear fruit during 2014.
The Indian coal mining industry is in dire need
of modernisation as acknowledged by all of
the major players in the local coal industry.
Very little technology is actually used in the
mines. Most mines are using 20 year old
Russian best practice mining methods.
Whereas developed markets are in lockdown,
the general sentiment in India is: if we can
show value, they will invest. Our Indian office
late 2013 with our joint
was opened
venture partner Deepak. We are confident
that we have teamed up with a partner who is
well respected and well networked in the
industry and who has similar business ethics
and standards.
in
The Advisory projects secured in India are sold
and resourced largely out of Australia and will
continue to be so for at least the next two
years while the Joint Venture builds capacity
and reputation. Coal India (CIL) is the national
coal producer with some 450 mines producing
80% of India’s coal. Increasing output from
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |9
REGIONAL REVIEW
least
these mines is a national priority. Non‐CIL
businesses are generally private and family
owned or at
connected. These
organisations have a positive view towards
investing for value or production increases.
Many provide captive coal to their own power
stations or mills and present an opportunity
to sell both Software and Advisory services.
New private coal block owners have been
under scrutiny for the last two years as
corruption investigations are finalised. When
this is finalised there will be 100+ new mines
starting at the same time, mostly owned by
companies who have never been in mining
before, all
looking for the products and
services we can offer.
vertically
integrated
RUSSIA and CIS
During 2013 we signed up our first substantial
Russian
steel
manufacturer who has both coal and iron ore
mines throughout Russia. During 2014 we will
continue to work with this customer as they
focus on improving their supply chains. Once
this project is complete, it will give us a new
level of credibility in that market.
IT
system
largest
integrators, NVision.
Software sales training has been completed
with NVision’s reseller team and we are in the
process of establishing ongoing support from
our local technical team to assist them during
their initial set up period.
the
that
following
the year,
AFRICA
The South African business was rebranded to
local
RPM during
management’s view
renewed
branding would drive growth in the region.
The South African mining industry has been
decimated by
labour unrest and general
instability which has manifested itself in loss
of investor confidence, no new projects or
expansions of any substance are planned and
there has been a significant downsizing and
capital budgets are
is
expecting an upturn during the next two
years. The South Africa business has
historically been focussed on software sales
and product consultancy that accompanies
this. RPM have a dominant presence in the
coal market in the region, both underground
and opencast, with an estimated market
penetration of 80%.
frozen. No one
Our Commodity Based Solutions are being
translated into Russian and, once available to
the market, they will fit well with the thinking
behind the Russian Design Institutes, who are
also looking to improve the productivity of the
industry through purpose built technology.
Our brand awareness in both the software
and advisory space is maturing and we are
seeing an increased level of invitations to
tenders, ranging in size from US$100,000 to
more than US$1 million both in Russia and the
receive have a
CIS. Most
the
included as
technology component
Russian mining
to
attempts
modernise its methodologies. Continuing to
promote our brand in the advisory space is
critical to being provided access to these
opportunities which have a high likelihood of
leading to software sales.
tenders we
industry
Attempts to expand the Advisory capability in
the region over the last two years have been
unsuccessful and subsequently unwound with
a subsequent reduction in employees.
The key objectives for 2014 will be to increase
software sales through the introduction of
new products into the market.
AMERICAS
The Canadian mining industry is clearly in a
slowdown period. All of our customers are
feeling different levels of pain depending
upon the commodity they are mining. Junior
companies in Toronto and Vancouver and the
gold miners appear to be the hardest hit,
however,
sands and diamond
producers are trading reasonably well. Potash
and coking coal is somewhere in the middle.
the oil
In June 2013 we announced a strategic
distribution agreement with one of Russia’s
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |10
REGIONAL REVIEW
The Canadian offices in Calgary and Toronto
will remain focused on the delivery of
technology products and
the associated
consulting and training that go with them.
Advisory services will still be important. This is
particularly the case for existing clients where
we have strong relationships already in place
and where our technology provides us with a
natural advantage over our competitors. We
are also targeting new clients where the use
of our software in completing the advisory
projects gives us the opportunity to showcase
our technology to new clients who may then
see value in purchasing our products.
Our North American (NAM) office which is
based in Denver has an established advisory
business made up of geologists, mining
engineers,
processing
engineers,
environmental
and mineral
engineers
economists. They work on all commodities,
including base metals, precious metals, coal
and industrial minerals. The types of projects
undertaken typically include scoping studies,
prefeasibility studies, feasibility studies, due
diligence and mine audits. With the exception
to the feasibility studies, RPM performs all
tasks with its own employees. For feasibility
studies, we team up with an engineering
company which is generally responsible for
design of the plant and infrastructure. We
also utilise the services of outside associates
when we
in certain
require specialists
technical areas where we lack a particular
specialty, or we need additional help to meet
the client’s schedules. When using outside
associates, with rare exception, we have our
own staff manage the project.
The North American mining industry is also
experiencing tough and challenging times.
Many companies have had very large write
losses. The
corresponding
downs and
investment community has punished these
companies harshly with dramatic stock price
declines.
In recent years, the majority of software sales
in NAM have eventuated mainly from repeat
in
business via cross‐sell and on‐sell. Whilst
repeat business is important, we must also
cultivate new business with new customers.
For our scheduling products XPAC and XACT,
we must gain
the metals
traction
marketplace. Our XERAS product is well
positioned to help customers through these
as
difficult
and
controlling costs’
is a key and common
customer deficiency, XERAS’
zero‐based‐
costing and activity‐based‐costing capability
will help mining companies ‘get their costs
under control’.
‘understanding
times
Whilst Latin America is a geographically large
region (three times the land mass of Australia)
is composed of nineteen different
and
markets, RPM’s products and services are best
targeted at Brazil, Chile, Colombia and Peru.
Mexico is a special case given it is closer both
economically and culturally to the United
States of America. It is important to note that
Brazil has a GDP that is equivalent to all other
Latin American countries combined and hence
is a key development market for RPM.
The business strategy for RPM
in Latin
America will be focused on the four markets
referred to above given that mining makes up
a significant proportion of the total GDP of
these markets.
In Brazil, we have a number of ongoing
advisory projects and prospects that will
sustain our cash flow and operating margins.
The focus in the technology space will be to
up sell and cross sell our new products into
our existing clients as well as sign up new
customers. Developing partnerships with key
consulting firms will be important in this
region.
GEOGAS
As a result of the heavy drop in the coal price,
coal exploration programmes on the east
coast of Australia were either cancelled or
severely cutback and adversely impacted on
both consulting and testing revenues during
the year. In the area of coal gas compliance
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |11
REGIONAL REVIEW
we saw a number of major contracts
retendered in the past six months and, as
expected, our competitors have priced their
offering aggressively.
laboratory
that was
The new Brisbane
commissioned during 2012 on the back of
major growth
to
continue), was decommissioned during 2013
due to lack of work and demonstrated the
sharp contraction in activity that disrupted
our business in 2013.
(which was
forecast
and
competence
its
GeoGAS was formally recognised for
technical
business
management in gas chromatography testing
the National Association of Testing
by
Authorities, Australia (NATA), a respected
industry body for
laboratory testing. The
NATA accreditation certifies that the stringent
in GeoGAS’
systems and processes used
laboratories in Mackay and Wollongong meet
the relevant international standard in gas
chromatography testing which
is used to
determine the breakdown of gas composition
obtained from a coal sample.
the
following
return of
In June, Jim Chisholm left the role of GM
GeoGAS
the
company’s founder Ray Williams to head the
consulting arm of the business.
Geoff
Williams also returned to GeoGAS at the end
of
to provide oversight and
leadership to the laboratories. Adding value to
our clients through the tight integration of
consulting expertise and laboratory testing
services is the key competitive focus of the
business in 2014.
the year
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |12
BOARD OF DIRECTORS
ALLAN BRACKIN
Non‐Executive Director and Chairman
Appointed to the Board of Directors
in
November 2011, Allan is also a Director of ASX
listed GBST Holdings Limited, Chairman of
Emagine Pty Ltd, and acts in an advisory
capacity to several IT companies. Allan has
been in the technology industry for more than
25 years.
(AMS),
Allan was
formerly Director and Chief
Executive Officer of Volante Group Limited,
and prior to this, co‐founder of Applied Micro
Systems
Systems
Integration, Prion Technology Distribution,
Quadriga Consulting Group and Affinity
Recruitment. These businesses were all part
of AAG Holdings of which Allan was Managing
Director.
Netbridge
Allan holds a Bachelor of Applied Science from
the Queensland University of Technology and
has completed the OPM (Owner/President
Management) Program at Harvard Business
School.
on
Non‐Executive
of management
RICHARD MATHEWS
Managing Director and Chief Executive Officer
Richard was appointed as Chief Executive
Officer in August 2012. Richard was previously
the
a
Director
RungePincockMinarco
Limited Board of
Directors. Richard is also the Non‐Executive
Chairman and former Chief Executive Officer
of eServGlobal Limited. He has more than 20
in
years
telecommunications,
and
investment. He is a founding partner of MHB
Holdings. Richard has extensive knowledge of
the mining and technology space and proven
track record of running global businesses and
creating
value.
shareholder
formerly CEO of Mincom,
Richard was
Australia’s
software
company. Richard has also held the role of
Senior Vice President, International at J D
Edwards.
experience
enterprise
software
largest
Richard holds a Bachelor of Commerce and a
Bachelor of Science from Otago University
and is an Associate Chartered Accountant.
DR IAN RUNGE
Non‐Executive Director
Ian Runge
founded RungePincockMinarco
Limited in 1977 after previously working in
the mining industry in central Queensland,
Europe and the United States of America. He
transitioned
full‐time operational
involvement in 1992, but has continued to
make significant contributions to the company
and to the industry since that time in the
areas of governance processes and business
strategy.
from
He is recognised as a leading expert in the
field of mining economics and strategy and is
the author of two books in this field, including
the
and
“Mining
Strategy”, published by the Society of Mining,
Metallurgy and Exploration (Denver).
Economics
textbook
Ian holds a Master of Engineering (Mining)
from the University of Queensland and a
Master of Arts and PhD in Economics from
George Mason University (Virginia, USA). Ian
is a Fellow of the Australasian Institute of
Mining and Metallurgy and a Fellow of the
Australian Institute of Company Directors.
ROSS WALKER
Non‐Executive Director
Appointed to the Board of Directors in March
2007, Ross is also a partner of Pitcher Partners
(Chartered Accountants) having joined them
in 1985. Pitcher Partners has more than 120
staff and 14 partners. Ross held previous roles
at Arthur Andersen, having worked locally and
in various offices throughout the United
States of America.
Ross has experience in corporate finance,
auditing, valuations and capital raisings. Ross
holds a Bachelor of Commerce from the
University of Queensland and is a member of
Institute of Chartered Accountants.
the
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |13
EXECUTIVE GENERAL MANAGERS
KIERAN WALLIS
Executive General Manager – Corporate
Services
Kieran was appointed as Executive General
Manager – Corporate Services in September
2012, having previously held the roles of Chief
Operating Officer (COO) and Chief Financial
Officer
joined
in October
RungePincockMinarco Limited
2010. Kieran is a Chartered Accountant with
more
than
in
professional
technology
industries.
20
services
experience
years’
(CFO)
since
and
he
Kieran has previously held CFO roles in the
ASX‐listed technology company GBST Holdings
and prior to joining RungePincockMinarco
Limited was CFO of the mining services
company
Kieran’s
background includes substantial international
management and operational experience
including the negotiation and execution of
major corporate finance transactions.
Industrea
Limited.
Kieran holds a Bachelor of Business
(Accountancy)
Queensland
University of Technology and is a member of
in
the Institute of Chartered Accountants
Australia.
from
the
JAMES O’NEILL
Executive General Manager – Group General
Counsel and Company Secretary
James was appointed as Executive General
Manager – Group General Counsel and
Company Secretary in December 2012.
legal
capacity
James has broad experience acting in an in‐
house
for multi‐national
companies, has served as company secretary
and has experience in corporate governance,
joint ventures, acquisitions and contract
negotiation with multi‐national licensing and
consulting service businesses.
James’ most recent role was as Regional
General Counsel with Hyder Consulting Pty
Ltd, a multi‐national advisory and design
engineering firm, and he has previously held
Senior Legal Counsel roles at Ansaldo STS
Australia Pty Ltd and Mincom Pty Ltd
respectively.
James holds a Bachelor of Laws and Bachelor
of Information Technology from Queensland
University of Technology and is a Solicitor and
Member of the Queensland Law Society.
MICHAEL KOCHANOWSKI
Executive General Manager – Chief Financial
Officer
Appointed Chief Financial Officer in February
2012, Michael’s
with
RungePincockMinarco Limited included four
years as Group Financial Controller.
prior
role
joining RungePincockMinarco
Michael is a Certified Public Accountant and
Fellow of the Tax Institute of Australia. Prior
to
Limited
Michael held a senior management position in
the business advisory division of chartered
accounting firm Moore Stephens.
Michael holds a Bachelor of Commerce and
Master of Business Administration from the
University of Queensland.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |14
CORPORATE DIRECTORY
Directors
Allan Brackin
Chairman
Richard Mathews
Managing Director
Dr Ian Runge
Non‐executive Director
Ross Walker
Non‐executive Director
Group General Counsel and Company Secretary
James O’Neill
Registered Office
Level 12, 333 Ann Street
Brisbane QLD 4000
Ph:
+61 7 3100 7200
Fax: +61 7 3100 7297
Web: www.rpmglobal.com
Auditor
BDO Audit Pty Ltd
Level 10, 12 Creek St
Brisbane QLD 4000
Share Registry
Computershare Investor Services Pty Limited
117 Victoria Street
West End QLD 4101
Stock Exchange Listing
The company is listed on the Australian Securities
Exchange Limited (ASX: RUL)
ABN 17 010 672 321
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |15
DIRECTORS’ REPORT
Your Directors present their report on RungePincockMinarco Limited and its subsidiaries for the year ended 30
June 2013 (referred to hereafter as the “Group”).
1.
Directors
The Directors of RungePincockMinarco Limited at any time during or since the end of the period were:
Non‐executive
Allan Brackin – Chairman
Dr Ian Runge
Ross Walker
Christian Larsen – resigned as an Executive 30 September 2012, resigned as a Director 31 January 2013
Executive
Richard Mathews ‐ appointed Managing Director and resigned as a Non‐executive Director 28 August 2012
David Meldrum ‐ Managing Director ‐ resigned 28 August 2012
2.
Principal Activities
The Group’s principal activities during the financial year consisted of:
a)
b)
c)
Technical, advisory and training services to the resources industry;
Software licensing, consulting, implementation and maintenance; and
Laboratory gas testing.
There were no significant changes in the nature of the Group’s principal activities during the financial year.
3.
Dividends
Dividends paid during the financial year were as follows:
2012 Full year dividend ordinary share 50% franked
2012 Special dividend ordinary share unfranked
5 October 2012
5 October 2012
1.0
1.0
Date of payment
Cents per share
Total amount
$ ‘000
1,241
1,241
2,482
4.
Review and Results of Operations
The 2013 financial year saw a marked deterioration in trading conditions for consulting services and software
license sales from the previous financial year. Net revenue in the year decreased by 26% to $73.9 million (2012:
$99.3 million). The reduction in revenue was primarily related to consulting services and was experienced across
all regions with revenue and utilisation levels being adversely impacted by increased competition for fewer
projects.
The cost base of the business was significantly reduced during the year in response to market conditions however
the fall in revenue resulted in Operating EBITDA (Earnings before Interest, Tax, Depreciation, Amortisation,
Restructure and Impairment) of $1.9 million (2012: $12.0 million).
The Group reported an $7.6 million loss after tax inclusive of restructuring and impairment charges (2012: profit
$6.2 million) with an earnings loss of 5.9 cents per share (2012: 5.0 cents earnings per share).
The Group had cash reserves of $6.9 million and no bank debt at the end of the financial year.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |16
DIRECTORS’ REPORT
4.
Review and Results of Operations (continued)
The company name was changed from Runge Limited to RungePinckockMinarco Limited to provide unified brand
recognition in all trading regions following shareholder approval at the Annual General Meeting of 23 November
2012.
Consulting Services
The Group’s consulting services include mining advisory, software consulting services and professional
development training courses.
Gross revenue from consulting services decreased by 33% to $51.7 million (2012: $76.7 million) with Australian
and African regions falling by 39% and 45% respectively. The downturn in mining industry activity, in particular
for coal related consulting services, increased competition for fewer projects and negatively impacted margins
and utilisations of consultants.
Software License and Maintenance
Software license sales for the year amounted to $6.8 million (2012: $10.9 million), with second half software sales
of $2.7 million reflecting difficult trading conditions for desktop software and tight constraints on capital and
operating expenditure within the mining sector. The normal seasonally strong finish to the year for software, as
experienced in previous years, was not replicated this year due to strong fiscal directives on capital expenditure
across the mining industry.
Recurring revenue from annual Software Maintenance grew by 15% to $11.3 million (2012: $9.8 million) with a
strong renewal rate from the existing software client base.
GeoGAS
The GeoGAS business provides mine gas consulting and laboratory testing services to the coal industry on the
East Coast of Australia. The laboratory testing business was similarly affected by a sharp decline in coal
exploration activity and associated consulting and testing experienced during the year with net revenue down by
31% to $7.7 million (2012: $11.1 million). In response to the slowdown the Brisbane laboratory, which had been
commissioned to take overflow from the Wollongong and Mackay laboratories was closed in November 2012.
Operating expenses
Operating expenses before amortisation and depreciation decreased by 18% to $72.0 million during the year
(2012: $87.3 million). Most significantly, Employee Benefits expense was reduced to $51.7 million (2012: $62.7
million) due to the decrease in staff headcount to 341 (2012: 474) as a result of restructuring and redundancies.
As a result of the restructuring activities the run rate of operating expenditure in the 4th quarter of the year
reduced to $16.0 million, down by $6.0 million or 27% from operating expenditure in the comparative 4th quarter
in 2012 of $22.0 million.
Restructure and Impairment costs
Following the appointment of Richard Mathews to the role of Managing Director and Chief Executive Officer at
the end of August 2012, the Group undertook a program of cost reduction and restructuring initiatives to better
align the business with the change in the operating environment. The costs incurred in these activities amounted
to $5.4 million and include:
• Redundancy costs following the restructure of corporate and administrative functions, closure of the
Malaysian software development office and Brisbane laboratory and re‐organisation of advisory
consulting operations which amounted to $2.7 million;
• Costs arising from sub‐letting surplus office space and cancellation of the Brisbane Laboratory lease, of
$1.3 million;
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |17
DIRECTORS’ REPORT
4.
Review and Results of Operations (continued)
• Non‐cash impairment losses of $1.4 million from:
- $0.7 million fitout impairment of GeoGAS Brisbane Laboratory;
- $0.3 million in capitalised software development costs write‐off as the company re‐focused on a new
enterprise software strategy; and
- $0.4 million impairment of goodwill in the South African region.
• Closure of Corelate business unit at a cost of $0.1 million.
Financial Position
During the year the company raised $9.2 million (net of costs of issue) from institutional investors and a Share
Purchase Plan. The purpose of the capital raisings was to replace monies used in restructuring activities and to
provide additional capacity to deliver enterprise software solutions to the market.
The Group had no bank debt at 30 June 2013 (2012: $5.0 million) and net assets of $47.7 million (2012: $48.3
million).
5.
Likely Future Developments ‐ Business Strategies and Prospects for Future Financial Years
The 2013 financial year saw a continued contraction in Australian sourced advisory opportunities and a growing
demand for both advisory and technology consulting skills in the Asian, Russian and Indian markets. In response
to this shift in market conditions the Asian and Australian operations were consolidated under one, flatter
management structure at the end of the financial year to better facilitate the delivery of projects to clients in
these markets going forward. The new structure aligns consulting capabilities along commodity lines and better
enables client projects to be managed and undertaken by teams of consultants across office locations in Australia
and Asia. Sales management of advisory and software prospects have also been consolidated across these
regions to provide better visibility and management of large, cross regional opportunities.
To assist in developing local client relationships and service delivery in emerging markets, the Group entered into
a joint venture in India, with the Deepak mining services group, and a strategic distribution agreement in Russia
with the NVision Group during the year. Deepak and RPM have worked together on a number of client projects
over the last two years and formalised this relationship in February 2013 to jointly target the expanding
technology and advisory market in India. RPM entered a strategic distribution agreement with NVision in June
2013 to provide NVisions network of over 4,500 staff in Russia and the Commonwealth of Independent States
(CIS) with the ability to sell and support RPM’s software products.
The GeoGAS business continued to invest in safety and quality systems throughout the year and was certified for
its technical competence and quality management in gas chromatography testing by the National Association of
Testing Authorities (NATA) in May 2013. GeoGAS was also successful in June 2013 in securing the return of
business founder, Ray Williams, to lead and direct the consulting capabilities of the business and ensure tight
integration between consulting and laboratory testing services.
In accordance with its stated software product strategy the Group released a series of product upgrades and new
products over the second half of the year including its first software product targeted at the enterprise software
market. These new products include:
• Underground Coal Solution – the first in a series of specifically designed mine scheduling solutions based
on commodity type and mining method;
• Open Cut Coal Solution – standardised mine scheduling solution designed specifically for open cut coal
mines;
• Block Aggregation – designed for open pit metals mines to facilitate the transfer of geological model
information into scheduling tools;
• Coal Seam Aggregation – similar functionality to Block Aggregation for open cut coal mines;
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |18
DIRECTORS’ REPORT
5.
Likely Future Developments ‐ Business Strategies and Prospects for Future Financial Years (Continued)
• Underground Coal TALPAC – simulates activity at a longwall face, enabling mine operators to pinpoint
areas of saving and productivity improvement in their longwall operation; and
• Xeras for Enterprise – the first fully integrated enterprise financial modelling software application
specifically built for the mining industry. Launched in May 2013 with the support of global enterprise
software vendor SAP AG, Xeras for Enterprise is designed to integrate with SAP’s financial and
maintenance management modules to allow unprecedented levels of financial visibility and cost control.
The 2013 financial year was one of challenge and change for mining services providers as the industry moved
through a cyclical change in focus from expansion to protection of cashflow and returns from existing assets.
The Group has responded to the volatility and uncertainty created by this shift by aggressively cutting costs and
reshaping the business to meet the changing needs of its clients. The change in market conditions is also
reflected in the software strategy of delivering standardise solutions that drive productivity improvements and
greater visibility and financial control at the enterprise level. As a result the Group has seen a step change in the
seniority and level of client engagement that is more consistent with its positioning as an enterprise vendor and
industry expert.
The Board believes that the changes made during the year to the structure and cost base of the business, and the
progress made in delivering the software strategy leave the business well positioned to benefit from the new
market conditions and deliver profitable growth in the next financial year.
6.
Legal Proceedings on Behalf of the Group
No person has applied for leave of Court to bring proceedings on behalf of the Group or interview in any
proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or
any part of those proceedings.
The Group was not a party to any such proceedings during the year.
7.
Significant Changes in the State of Affairs
There was no matter or circumstance during the financial year that has significantly affected the state of affairs of
the Group not otherwise disclosed.
8.
Matters Subsequent to the End of the Financial Year
No matter or circumstance has arisen since 30 June 2013 that has significantly affected, or may significantly
affect:
a) The Group’s operations in future financial years; or
b) The results of those operations in future financial years; or
c) The Group’s state of affairs in future financial years.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |19
DIRECTORS’ REPORT
9.
Information on Current Directors and Company Secretary
Directors
Allan Brackin
Dr Ian Runge
Ross Walker
Richard Mathews
Experience
Chairman, Non‐executive Director. Joined the Board in
November 2011. Allan was formerly Director and Chief
Executive Officer of Volante Group Limited, and prior to this,
co‐founder of Applied Micro Systems (AMS), Netbridge
Systems Integration, Prion Technology Distribution, Quadriga
Consulting Group and Affinity Recruitment.
Qualifications: Bachelor of Applied Science
Other listed company directorships in last three years:
Director of GBST Holdings Limited since 2005
Special
responsibilities
Chairman
Member and Chairman –
HR and Remuneration
Committee
Non‐executive Director, company founder. Director since
December 1986.
Qualifications: M.E.(Mining Engineering), Ph D. (Economics),
FAusIMM, FAICD
Other listed company directorships in last three years: None
Non‐executive Director
Committee and Member
– Audit and Risk
Committee
Non–executive Director. Joined the Board in March 2007.
Joined Pitcher Partners (previously Johnston Rorke) in 1985,
Managing Partner in 1995 ‐ 2013. Predominantly involved in
corporate finance, auditing, valuations, capital raisings and
mergers and acquisitions for the past 20 years.
Qualifications: Bachelor of Commerce, FCA
Other listed company directorships in last three years: None
Non – executive Director
Member and Chairman –
Audit and Risk
Committee
Member – HR and
Remuneration
Committee
Executive Director
Member – HR and
Remuneration
Appointed Managing Director 28 August 2012.
Richard is also the Non‐Executive Chairman and former Chief
Executive Officer of eServGlobal Limited. He has more than
20 years’ of management experience in telecommunications,
software and investment. He is a founding partner of MHB
Holdings Pty Ltd.
Richard was formerly CEO of Mincom, Australia’s largest
enterprise software company. Richard has also held the role
of Senior Vice President, International at J D Edwards and
Director of TransLink Transport Authority.
Qualifications: Bachelor of Commerce, Bachelor of Science,
ACA
Other listed company directorships in last three years: Non‐
executive chairman of eServGlobal Ltd
All Directors are members of the Nominations Committee.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |20
DIRECTORS’ REPORT
9.
Information on Current Directors and Company Secretary (Continued)
Company Secretary
James O’Neill, Group General Counsel and Company Secretary. Joined RungePincockMinarco Limited in
December 2012. Qualifications: Bachelor of Laws and Bachelor of Information Technology from Queensland
University of Technology and is a Solicitor and Member of the Queensland Law Society.
10. Meetings of Directors
The number of meetings of the company’s Board of Directors and of each Board committee held during the year
ended 30 June 2013 and the number of meetings attended by each Director were:
Full meetings
of Directors
Audit & Risk
Committee
HR & Remuneration
Committee
IP & Technology
Committee1
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Allan Brackin
Dr Ian Runge
Ross Walker
Richard Mathews
Christian Larsen
David Meldrum
11
11
10
11
6
3
11
11
11
11
6
3
‐
3
3
‐
‐
‐
‐
3
3
‐
‐
‐
2
‐
2
2
‐
‐
2
‐
2
2
‐
‐
‐
2
‐
2
2
‐
‐
2
‐
2
2
‐
1 IP & Technology Committee incorporated as an agenda item in the board meetings from December 2012.
11.
Shares Under Option
Options granted to directors and executives of the company
During the year the company granted options for no consideration over unissued ordinary shares in the Company
to the following directors and to the following officers of the Company as part of their remuneration:
Officers
K Wallis
M Kochanowski
J O’Neill
Number of options granted
2,800
33,400
115,000
151,200
Unissued ordinary shares of RungePincockMinarco Limited under option at the date of this report are as follows:
Date options granted
14/12/2010
29/05/2012
03/05/2013
Expiry date
30/09/2014
31/08/2016
31/08/2016
Issue price of shares
$0.57
$0.40
$0.55
Number under option
346,402
1,956,000
578,600
2,881,002
No option holder has any right under the options to participate in any other share issue of the company or any
other entity. 15,734 shares were issued under exercise of options in 2013.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |21
DIRECTORS’ REPORT
12.
Insurance of Officers
The company has indemnified the directors and executives of the company for costs incurred, in their capacity as
a director or executive, for which they may be personally liable, except where there is a lack of good faith.
During the financial year, the company paid insurance premiums to insure the Directors and Officers of the
company against certain risks associated with their activities as officers of the company. The terms of that policy
prohibit disclosure of the nature of liability covered, the limit of such liability and the premium paid.
13.
Environmental Legislation
RungePincockMinarco Limited and its controlled entities are not subject to any particular and significant
environmental regulation under a law of the Commonwealth or of a State or Territory.
14.
Auditor
BDO Audit Pty Ltd was appointed in November 2012 by a vote of members at the company’s Annual General
Meeting.
There were no non‐audit services provided by BDO Audit Pty Ltd in the 2013 financial year.
15.
Auditor’s Independence Declaration
In accordance with Section 307C of the Corporations Act 2001, a copy of the auditor’s independence declaration
is enclosed on page 30 .
16.
Directors’ Interests
The relevant interest of each director in the shares and options issued by the Company, as notified by the
directors to the ASX in accordance with section 205G(1) of the Corporations Act 2001, at the date of this report is
as follows:
A Brackin
Dr I Runge
R Walker
R Mathews
17.
Rounding of Amounts
RungePincockMinarco Limited
Ordinary
shares
Options over
ordinary shares
327,273
16,310,484
627,273
6,512,003
‐
‐
‐
‐
The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that
Class Order amounts in the financial report and Directors’ report have been rounded off to the nearest thousand
dollars, unless otherwise stated.
18.
Remuneration Report ‐ Audited
The remuneration report is set out under the following main headings:
A.
B.
C.
D.
Principles used to determine the nature and amount of remuneration;
Service agreements;
Details of remuneration; and
Bonus and share‐based compensation.
Remuneration and compensation have the same meaning in this report.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |22
DIRECTORS’ REPORT
18.
Remuneration Report ‐ Audited (Continued)
18A.
Principles Used to Determine the Nature and Amount of Remuneration
This report discusses the Group’s policies in regard to compensation of key management personnel (KMP). The
identified KMP have authority and responsibility for planning, directing and controlling the activities of the Group.
In addition to the Directors, the Company assessed the Chief Financial Officer, Group General Counsel &
Company Secretary and the EGM Corporate Services roles within the Group as having authority and responsibility
for planning, directing and controlling all activities of the Group, directly or indirectly, during the 2013 financial
year.
The Board has established an HR and Remuneration Committee to assist with remuneration and incentive policies
enabling the Group to attract and retain KMP and Directors who will create value for shareholders and support
the Group’s mission. The HR and Remuneration Committee obtains independent advice if required on the
appropriateness of compensation packages given trends in comparative companies. In the 2013 financial year
the Committee has not used a remuneration consultant. The Corporate Governance Statement provides further
information on the role of this Committee.
The compensation structures explained below are designed to attract suitably qualified candidates, reward the
achievement of strategic, operational objectives and achieve the broader outcome of creation of value for
shareholders.
The compensation structures take into account:
• The capability and experience of the KMP;
• Their ability to control the relevant segment’s performance; and
• The segment or Group earnings.
Compensation packages include a mix of fixed and short‐term and long‐term performance‐based incentives.
In addition to their salaries, the Group also provides non‐cash benefits to its KMP and contributes to a defined
contribution superannuation plan on their behalf.
Fixed Compensation
Fixed compensation is calculated on a total cost basis and includes salary, allowances, non‐cash benefits,
employer contributions to superannuation funds and any fringe benefits tax charges related to employee
benefits, including motor vehicles.
Compensation levels are reviewed using an individual approach, based on evaluation of the individual, and a
comparison to the market. A KMP’s compensation is also reviewed on promotion.
Performance Linked Compensation
Performance linked compensation includes both short‐term and long‐term incentives and is designed to reward
KMP for meeting and exceeding their Key Performance Objectives (KPOs). The Short‐term Incentive (STI) is an ‘at
risk’ bonus provided in the form of cash, while the Long‐term Incentive (LTI) is provided as options over ordinary
shares of the Company under the rules of the Employee Share Option Plan (ESOP) (see note 26 to the financial
statements). The current long‐term performance incentive structure was implemented in the 2008 year and
amended in 2010 and 2012 years.
The table below sets out the performance based compensation paid to KMP together with earnings for the same
period. Performance based compensation consists of STI cash bonus and LTI share‐based payments.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |23
DIRECTORS’ REPORT
18.
Remuneration Report ‐ Audited (Continued)
18A.
Principles Used to Determine the Nature and Amount of Remuneration (Continued)
Performance based compensation
Year ended
30 June
STI
$’000
2009
2010
2011
2012
2013
‐
55
75
56
‐
Short‐term Incentive Bonus
LTI
$’000
91
115
‐
68
(71)
Total
$’000
Net profit/(Loss)
$’000
Dividends
$’000
Share price
$
91
170
75
124
(71)
7,918
2,288
3,590
6,237
(7,565)
4,343
4,343
1,241
2,482
2,482
0.52
0.40
0.37
0.35
0.47
Effective 1 July 2012, the Group implemented a variable pay structure, referred to as the Executive General
Manager Incentive Plan (EGMIP). Each of the identified KMP have a portion of their remuneration linked to the
EGMIP. The key objective of the EGMIP is to create clear alignment between individual and business performance
and remuneration by providing a performance‐based reward to participants in line with their relative
contribution to the business. The EGMIP achieves the alignment by focusing participants on achieving goals which
contribute to sustainable shareholder value, and providing a clear link between performance and the company
financial result.
There are two components of the EGMIP, outlined as follows:
Company NPAT Target:
80% of STI %
Individual Performance:
20% of STI %
The Company NPAT Target component has a qualification threshold of 80% of target, i.e. once 80% of target has
been reached eligibility for both components activate, and are lined in step thereafter until the total STI is
achieved.
An individual KMP’s entitlement under the Individual Performance component of the EMIP is subject to the
review and discretion of the CEO.
Cash bonuses are paid, provided for or forfeited in the year to which they relate. All payments under the EGMIP
for the 2013 year were forfeited.
Long‐term Incentive
Options were issued in 2011, 2012 and 2013 under the Employee Share Option Plan (ESOP) to KMP at the
discretion of the Board.
The rules allow the Board to set a timetable for vesting of options in order to reward the longer term
performance by setting performance hurdles which must be met for the option holder to be entitled to exercise
the options.
The options issued in 2011 include vesting conditions related to Earnings per Share growth, EBITA margin and TSR
peer comparison. The performance hurdles for each condition are as follows:
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |24
DIRECTORS’ REPORT
18.
Remuneration Report ‐ Audited (Continued)
18A.
Principles Used to Determine the Nature and Amount of Remuneration (Continued)
Vesting Condition
EPS average annual growth from the year preceding
grant to the year following grant above average annual
Australian CPI increase in the corresponding period.
EBITA margin in the year following grant
Hurdle
Less than 4%
4% or more, but less than 8%
% of Options which vest if
vesting condition satisfied
0%
20% plus an additional 5% for
each 1% increment
8% or more
Less than 15%
40%
0%
15% or more but less than 20%
20% plus an additional 4% for
each 1% increment
TSR growth above peer comparison group
20% or more
Less than 50th percentile
th
50
percentile or higher but
th
lower than 75
percentile
40%
0%
st
th
10% plus, from 51
percentile, 0.4% for every
1 percentile
to 75
th
percentile or higher
75
20%
The options issued in 2012 and 2013 vest in accordance with the following table if the Company’s average annual
earnings per share (EPS) growth (Average EPS Growth) over the performance period comprising the 2012, 2013
and 2014 financial years (Performance Period), is at least 10 percentage points above the Average Australian
Consumer Price Index (CPI) Increase for the corresponding period.
EPS Vesting Condition
Average EPS Growth over the
Performance Period above Average Australian CPI Increase
in the corresponding period
% of Options which vest
Less than 10 percentage points
0%
10 percentage points or more, but less than
20 percentage points
50% plus an additional 5% for each
1% increment
20 percentage points or more
100%
The Board has a policy that restricts Directors and executives of the Group from entering into financial contracts
secured by shares and other securities of the Company. This policy requires the approval of the Chairman of the
Board for any financial arrangements or facilities related to company shares held by the Directors and executives.
Non‐executive Directors
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 periodically by the Board and are
determined within an aggregate Directors’ fee pool limit, which is periodically recommended for approval by
shareholders. The pool currently stands at $500,000 (2012: $500,000).
Non‐executive Directors’ base remuneration was last reviewed with effect from 1 March 2008. Both the
Chairman’s and Non‐executive Directors’ remuneration is inclusive of committee fees.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |25
DIRECTORS’ REPORT
18.
Remuneration Report ‐ Audited (Continued)
18B.
Service Agreements
Details of contracts with Directors and KMP of the Group are set out below.
A Brackin
Dr I Runge
R Walker
R Mathews
K Wallis
M Kochanowski
J O’Neill
Terms of agreement
Unlimited in term
Unlimited in term
Unlimited in term
Unlimited in term
Unlimited in term
Unlimited in term
Unlimited in term
Base salary including
superannuation
$120,000
$80,000
$80,000
$500,000
$359,700
$239,800
$250,000
Termination benefit
Notice Period
Nil
Nil
Nil
6 months
6 months
3 months
2 months
Nil
Nil
Nil
6 months
3 months
3 months
2 months
The KMP are also entitled to receive on termination of employment their statutory entitlements of accrued
annual and long service leave, together with any superannuation benefits. Compensation levels are reviewed
each year to meet the principles of the compensation policy.
18C. Details of Remuneration
Directors
Chairman (Non‐executive)
Allan Brackin
Executive Directors
Richard Mathews ‐ appointed Managing Director 28 August 2012 and resigned as a Non‐executive Director
David Meldrum ‐ Managing Director ‐ resigned 28 August 2012 and resigned as KMP 12 November 2012.
Non‐executive Directors
Dr Ian Runge
Ross Walker
Christian Larsen – resigned as an Executive 30 September 2012, resigned as a Director 31 January 2013
Other Key Management Personnel
In addition to executive Directors mentioned above, the following persons were assessed by the Company as the
executives who had the greatest authority and responsibility for planning, directing and controlling all activities of
the Group, directly or indirectly, during the 2013 financial year:
Name
Kieran Wallis
Position
Executive General Manager – Corporate Services
Michael Kochanowski
Chief Financial Officer
Ken Lewis
James O’Neill
Group General Counsel and Company Secretary (resigned 10 Oct 2012)
Group General Counsel and Company Secretary (appointed 10 Dec 2012)
Details of remuneration of each Director of RungePincockMinarco Limited and each of the other KMP of the
Group are set out in the following tables. The Board has reassessed the executive group and reduced the
disclosures in the below tables to remove those individuals who act solely in a support function.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |26
DIRECTORS’ REPORT
18.
Remuneration Report ‐ Audited (Continued)
18C. Details of Remuneration (Continued)
Short‐term benefits
Post ‐ employment
benefits
Non –
monetary
benefits1
Supera‐
nuation
Termin‐
ation
benefits
STI
cash
bonus
$
$
$
$
$
$
%
Share‐
based
payment
Options
Total
Proportion
of remun‐
eration
perform‐
ance
related
2013
Directors
A Brackin
Dr I Runge
R Walker
R Mathews
D Meldrum
C Larsen
Cash salary and
fees
$
110,088
80,000
80,000
415,121
86,985
104,959
877,153
Other Key Management Personnel
K Wallis
M Kochanowski
K Lewis 3
J O’Neill 2
334,950
198,294
87,995
128,793
750,032
1,627,185
Total
2012
Directors
A Brackin
D Meldrum
C Larsen
V Gauci
Dr I Runge
R Walker
R Mathews
N Hatherly
64,218
361,661
388,499
36,229
80,000
83,750
30,580
47,500
1,092,437
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
7,941
54,551
‐
62,492
9,472
31,178
2,647
5,268
48,565
111,057
‐
84,900
‐
3,191
‐
‐
‐
‐
88,091
9,912
‐
‐
20,966
15,627
4,118
50,623
24,750
19,800
14,971
11,591
71,112
121,735
5,782
38,836
15,199
3,261
‐
‐
2,752
‐
65,830
‐
‐
‐
‐
607,556
252,899
860,455
‐
‐
95,409
‐
95,409
955,864
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
(37,611)
(25,102)
(62,713)
4,545
2,046
(17,247)
1,915
(8,741)
(71,454)
‐
37,671
19,318
1,759
‐
‐
‐
‐
58,748
120,000
80,000
80,000
444,028
727,108
336,874
1,788,010
373,717
251,318
183,775
147,567
956,377
2,744,387
70,000
523,068
423,016
44,440
80,000
83,750
33,332
47,500
1,305,106
Other Key Management Personnel
K Wallis
K Lewis
M Kochanowski 2
S Henderson3
P Olsen3
‐
55,872
‐
‐
‐
55,872
Total
55,872
1 Includes car park and salary sacrifice vehicle
311,667
317,481
168,519
31,423
162,929
992,019
2,084,456
8,876
8,876
33,472
(2,843)
10,962
59,343
147,434
2 Became Key Management Personnel during the year
27,885
23,353
18,055
3,848
12,534
85,675
151,505
‐
‐
‐
76,667
‐
76,667
76,667
10,985
14,257
6,467
12,118
10,582
9,009
67,757
359,412
419,839
226,513
96,977
175,843
1,278,585
2,583,691
3 Resigned during the year
The termination benefit includes contractual termination benefit, and any statutory entitlements such as unused
annual and long service leave.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |27
Value of
options
as
propor‐
tion of
remun‐
eration
%
‐
‐
‐
‐
(5.2)
(7.5)
(3.5)
1.2
0.8
(9.4)
1.3
(0.9)
(2.6)
‐
7.2
4.6
4.0
‐
‐
‐
4.5
3.1
3.4
2.9
(12.5)
(6.0)
0.6
2.3
‐
‐
‐
‐
(5.2)
(7.5)
(3.5)
1.2
0.8
(9.4)
1.3
(0.9)
(2.6)
‐
7.2
4.6
4.0
‐
‐
‐
4.5
3.1
16.7
2.9
(12.5)
(6.0)
5.0
4.4
DIRECTORS’ REPORT
18.
Remuneration Report ‐ Audited (Continued)
18D.
Bonuses and Share‐based Compensation Benefits
All options refer to options over ordinary shares of RungePincockMinarco Limited, which are exercised on a one‐
for‐one basis under the ESOP Plan.
The assessed fair value at grant date of options granted to the individuals is allocated equally over the period
from grant date to vesting date, based on an estimate of the number of options likely to vest, and the amount is
included in the remuneration tables above. Fair values at grant date are determined using Trinominal Lattice and
Hoadley’s Hybrid models that take into account the exercise price, the term 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. Model inputs for options granted during the year are disclosed in note 26 in the
financial report.
Details of options over ordinary shares in the company provided as remuneration to each director and each of
the KMP and the Group are set out below. When exercisable, each option is convertible into one ordinary share
of RungePincockMinarco Limited. Further information on the options is set out in note 26 to the financial
statements.
Number of
options
granted during
the year1
Value of
options at
grant date 2
$
Number of
options vested
during the year
3
Number of
options lapsed
during the year
Value at lapse
date4
$
A Brackin
Dr I Runge
R Walker
R Mathews
D Meldrum
C Larsen
K Wallis
M Kochanowski
K Lewis
J O’Neill
1 Options granted during the year aligned the total number of options issued for similar positions in the company. (Refer note
‐
‐
‐
‐
810,600
295,600
70,800
47,400
252,266
‐
‐
‐
‐
‐
138,150
29,396
‐
‐
6,000
‐
‐
‐
‐
‐
‐
‐
2,800
33,400
‐
115,000
‐
‐
‐
‐
22,400
22,400
15,734
10,534
15,734
‐
‐
‐
‐
‐
‐
‐
557
6,647
‐
22,885
20)
2 The value at grant date calculated in accordance with AASB 2 Share‐based Payment of options granted during the year as
part of remuneration.
3 Options with a grant date of 2010 vested in October 2012 with an exercise price of $0.57.
4 The value at lapse date of options that were granted as part of remuneration and that lapsed during the year because a
vesting condition was not satisfied. The value is determined at the time of lapsing, but assuming the condition was
satisfied. The value of options which lapsed during the 2013 financial year is calculated using the closing share price on the
lapse date with the exercise price subtracted.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |28
DIRECT
D
TORS’ R
T
REPORT
18.
1
18D.
1
Remu
uneration Re
eport ‐ Audit
ted (Continu
ued)
Bonu
uses and Sha
are‐based Co
ompensation
n Benefits (C
Continued)
Details of rem
D
muneration:
Bonuses and
d share‐based
d compensa
s
tion benefits
The terms an
T
nd conditions
s of each gra
nt of options
s issued in 2
013 are as fo
ollows:
Term/Con
ndition
Value at o
option grant d
date
Exercise p
price
Grant Dat
te
Expiry dat
te
Vesting an
nd exercise da
ate
$0.199
$0.55
03/05/2013
0
31/08/2016
3
1/09/2014
D
During the re
compensatio
c
eporting peri
n:
od the follow
wing shares
were issued
on the exer
rcise of the o
options previ
iously grante
ed as
Number of s
shares
Amount paid
A
share $
per
K Wa
allis
15,734
0.57
Va
lue of options
s exercised in
n year 1
$
‐
1
The value of t
trading on th
the options ex
he date the op
xercised durin
ptions were ex
ng the year is
xercised after
calculated as
r deducting th
the market p
e price paid t
rice of shares
o exercise the
s of the Comp
e option.
any as at clos
e of
T
There are no
year.
y
amounts un
npaid on the
e shares issue
ed as a resu
lt of the exe
rcise of the o
options in th
he 2013 fina
ncial
All cash bonu
A
uses for KMP
P and Executi
ive Directors
s were forfeit
ted in 2013.
2012 Annual
2
General Me
eeting (AGM
)
The Company
T
eport.
r
y’s 2012 rem
muneration
report was a
adopted at
Remuneratio
R
on report ‐ En
nd
2012 AGM w
with 95% of
f shareholde
rs voting for
r the
This report is
T
made in acc
cordance wit
th a resolutio
on of the Dir
rectors.
n
Allan Brackin
A
C
Chairman
Brisbane
B
Dated: 22 Au
D
ugust 2013
RUNGEPINCOC
R
KMINARCO LIM
MITED // ANNUAL
L REPORT 2013
|29
Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Level 10, 12 Creek St
Brisbane QLD 4000
GPO Box 457 Brisbane QLD 4001
Australia
DECLARATION OF INDEPENDENCE BY A S LOOTS TO THE DIRECTORS OF RUNGEPINCOCKMINARCO LIMITED
As lead auditor of RungePincockMinarco Limited for the year ended 30 June 2013, I declare that, to the best of
my knowledge and belief, there have been no contraventions of:
•
•
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
This declaration is in respect RungePincockMinarco Limited and the entities it controlled during the period.
A S Loots
Director
BDO Audit Pty Ltd
Brisbane, 22 August 2013
BDO Audit Pty Ltd ABN 33 134 02 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company
limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of
independent member firms.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |30
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2013
Notes
2013
$’000
2012
$’000
Revenue from continuing operations
Services
Licence sales
Software maintenance
Other revenue
Revenue
Rechargeable expenses
Net Revenue
60,287
6,823
11,348
1,238
79,696
(5,795)
73,901
85,588
10,895
9,826
604
106,913
(7,563)
99,350
Other income – insurance proceeds
‐
1,969
Expenses
Amortisation
Depreciation
Employee benefits expense
Other employee costs
Office expenses
Professional services
Rent
Restructure and Impairment costs
Travel expenses
Other expenses
Profit/(Loss) before finance costs and income tax
Finance income
Finance costs
Net finance costs
Profit/(Loss) before income tax
Income tax benefit/(expense)
Profit/(Loss)
12
11
4
3
5
(1,554)
(2,240)
(51,745)
(2,037)
(4,110)
(2,112)
(6,920)
(5,416)
(1,903)
(3,224)
(81,261)
(7,360)
152
(584)
(432)
(7,792)
227
(7,565)
(2,510)
(2,762)
(62,723)
(3,316)
(4,673)
(2,889)
(6,904)
‐
(3,000)
(3,781)
(92,558)
8,761
148
(661)
(513)
8,248
(2,011)
6,237
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |31
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2013
Notes
2013
$’000
2012
$’000
(7,565)
6,237
Profit / (Loss)
Other comprehensive income
Items that may be classified subsequently to profit or loss:
Foreign currency translation differences
Items that will not be classified subsequently to profit or loss:
Financial assets at fair value through other comprehensive income
Income tax attributable to financial assets
Other comprehensive income / (loss), net of tax
Total comprehensive income
Earnings per share
Basic earnings per share (cents)
Diluted earnings per share (cents)
25
25
658
‐
(480)
178
(7,387)
(5.9)
(5.9)
(172)
(103)
31
(244)
5,993
5.0
5.0
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |32
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2013
Notes
2013
$’000
2012
$’000
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Work in progress
Current tax receivable
Other assets
Total current assets
Non‐current assets
Trade and other receivables
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non‐current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Provisions
Current tax liabilities
Other Liabilities
Total current liabilities
Non‐current liabilities
Borrowings
Provisions
Deferred tax liabilities
Other Liabilities
Total non‐current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings
Total equity
7
8
9
10
8
11
6
12
13
14
15
16
14
15
6
16
17
18
18
6,928
16,887
1,998
1,201
1,583
28,597
348
8,200
6,143
27,333
42,024
70,621
5,154
14
3,285
112
9,799
18,364
‐
640
236
3,713
4,589
22,953
47,668
48,664
(3,986)
2,990
47,668
12,141
22,959
2,566
263
2,048
39,977
269
10,199
4,807
28,676
43,951
83,928
7,397
5
7,906
873
10,666
26,847
5,013
197
47
3,504
8,761
35,608
48,320
39,418
(4,135)
13,037
48,320
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |33
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2013
Contributed
equity
Reserves
Retained profits
Total equity
Balance at 1 July 2012
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners in their capacity as owners
Contributions of equity, net of transaction costs
9,246
Employee share options
Dividends paid
Balance at 30 June 2013
Balance at 1 July 2011
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners in their capacity as owners
Contributions of equity, net of transaction costs
Employee share options
Dividends paid
$'000
39,418
$'000
(4,135)
‐
‐
‐
‐
‐
9,246
48,664
‐
178
178
‐
(29)
‐
(29)
(3,986)
39,408
(3,999)
‐
‐
‐
10
‐
‐
10
‐
(244)
(244)
‐
108
‐
108
Balance at 30 June 2012
39,418
(4,135)
$'000
$'000
13,037
(7,565)
‐
(7,565)
‐
‐
(2,482)
(2,482)
2,990
9,282
6,237
‐
6,237
‐
‐
(2,482)
(2,482)
13,037
48,320
(7,565)
178
(7,387)
9,246
(29)
(2,482)
6,735
47,668
44,691
6,237
(244)
5,993
10
108
(2,482)
(2,364)
48,320
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |34
CONSOLIDATED STATEMENT OF CASHFLOWS
FOR THE YEAR ENDED 30 JUNE 2013
Notes
2013
$'000
2012
$'000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Proceeds from Key Man insurance
Interest and dividends received
Finance costs
Restructure costs
Income taxes paid
Net cash (outflow) / inflow from operating activities
23
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Investments
Payments for intangible assets
Net cash outflow from investing activities
Cash flows from financing activities
Contributions of equity, net of transaction costs
Repayment of finance leases
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents held
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 the end of the financial year
7
89,634
(89,278)
356
‐
152
(584)
(2,670)
(3,102)
(5,848)
(888)
5
(26)
(735)
(1,644)
9,247
(4)
‐
(5,000)
(2,482)
1,761
(5,731)
12,141
518
6,928
112,195
(100,072)
12,123
1,969
148
(661)
‐
(2,514)
11,065
(3,831)
45
‐
(1,404)
(5,190)
10
(5)
5,650
(6,100)
(2,482)
(2,927)
2,948
9,344
(151)
12,141
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |35
NOTES ON THE FINANCIAL STATEMENTS
1.
Summary of Significant Accounting Policies
The principal accounting policies adopted in the preparation of the financial report are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
The financial report comprises the consolidated entity (“Group”) consisting of RungePincockMinarco Limited
and its subsidiaries. The company name was changed from Runge Limited to RungePincockMinarco Limited
following shareholder approval at the Annual General Meeting of 23 November 2012.
(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 and the Corporations Act
2001. RungePincockMinarco Limited is a for‐profit entity for the purposes of preparing the financial
statements.
Compliance with IFRS
The consolidated financial statements of RungePincockMinarco Limited also comply with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Historical cost convention
These financial statements have been prepared under the historical cost convention, except for available‐for‐
sale financial assets at fair value. The method used to measure fair values is discussed further below.
New and amended standards adopted by the Group
The following amendment to standard is mandatory for the first time for the financial year beginning 1 July
2012: AASB 2011‐9 Amendments to Australian Accounting Standards – Presentation of Items of Other
Comprehensive Income.
The adoption of this standard did not have any material impact on the current or any prior period and is not
likely to materially affect future periods.
(b)
Principles of Consolidation
The consolidated financial statements incorporate the assets and liabilities of all entities controlled by
RungePincockMinarco Limited as at 30 June 2013 and the results of all controlled entities for the year then
ended. RungePincockMinarco Limited and its controlled entities together are referred to in this financial report
as the “consolidated entity” or the “Group”.
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern
the financial and operating policies, generally accompanying a shareholding of more than one‐half of the voting
rights. The existence and effect of potential voting rights that are currently exercisable or convertible are
considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de‐
consolidated from the date that control ceases.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group (refer
to note 1(k)).
Intercompany transactions, balances and unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of
the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |36
NOTES ON THE FINANCIAL STATEMENTS
1.
(c)
Summary of Significant Accounting Policies (Continued)
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 and to unused tax losses.
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,
the 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 balance sheet 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 for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses in the
tax jurisdiction in which they arose.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount
and tax bases of investments in controlled entities where the parent entity 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.
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.
Tax consolidation legislation
RungePincockMinarco Limited and its wholly owned Australian controlled entities have implemented the tax
consolidation legislation.
The head entity, RungePincockMinarco 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 standalone taxpayer in its own right.
In addition to its own current and deferred tax amounts, RungePincockMinarco Limited also recognises the
current tax liabilities or assets and the deferred tax assets arising from the unused tax losses and unused tax
credits assumed from controlled entities in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as
amounts receivable or payable to other entities in the Group. Details about the tax funding agreements are
disclosed in note 5.
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.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |37
NOTES ON THE FINANCIAL STATEMENTS
1.
(d)
Summary of Significant Accounting Policies (Continued)
Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operational 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 Managing Director.
The assets and liabilities of the Group are regularly reviewed on a consolidated basis but are not regularly
reported to the chief operating decision maker at a segment level. As such this information has not been
included in the Operating Segment note 2.
(e)
i)
Foreign Currency Translation
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
is
RungePincockMinarco Limited’s functional and presentation currency.
in Australian dollars, which
statements are presented
consolidated
financial
ii)
Transactions and balances
Foreign currency transactions are initially translated into the functional currency using the exchange
rates prevailing at the date of the transaction. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year end exchange rates of monetary assets
and liabilities denominated in foreign currencies are recognised in profit or loss, except when they are
deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or 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 whose changes in the fair value are presented in other
comprehensive income are recognized in other comprehensive income.
iii)
Group entities
The results and financial position of all the Group entities (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 balance sheet presented are translated at the closing rate at the
date of that balance sheet;
income and expenses for each income statement and statement of comprehensive income are
translated at daily exchange rates; and
all resulting exchange differences are recognised in other comprehensive income.
Fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities
of the foreign entities and translated at the closing rate.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |38
NOTES ON THE FINANCIAL STATEMENTS
1.
(f)
i)
Summary of Significant Accounting Policies (Continued)
Revenue Recognition
Sale of licences
Revenue from the sale of licences is recognised when the amount can be reliably measured and all
significant risks and rewards of ownership have been transferred to the buyer. In most cases this
coincides with the transfer of legal title or the passing of possession to the buyer.
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed
as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third
parties.
ii)
Consulting
Revenue from the provision of consulting services is recognised on an accruals basis in the period in
which the consulting service is provided. Revenue from the provision of these services is calculated
with reference to the professional staff hours incurred on each client assignment adjusted for any time
that may not be recoverable.
iii)
Software maintenance
When the outcome of a transaction involving software maintenance can be estimated reliably, revenue
associated with the transaction is recognised on a straight‐line basis over the service period.
iv)
Interest revenue
Interest revenue is recognised using the effective interest method. It includes the amortisation of any
discount or premium.
(g)
Trade Receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less provision for impairment. Trade receivables are generally due for settlement
within 30 days. They are presented as current assets unless collection is not expected for more than 12 months
after the reporting date.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible
are written off by reducing the carrying amount directly. An allowance for impairment of trade receivables is
established when there is objective evidence that the Group will not be able to collect all amounts due
according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that
the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments (more than
60 days overdue) are considered indicators that the trade receivable may be impaired. The amount of the
provision is the difference between the asset’s carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. Cash flows relating to short‐term receivables are not
discounted if the effect of discounting is immaterial. The amount of the allowance is recognised in other
expenses in profit or loss. Subsequent recoveries of amounts previously written off are credited against other
expenses in profit or loss.
(h)
Work in Progress
Work in progress represents costs incurred and profit recognised on client assignments and services that are in
progress at balance date. Work in progress is valued at net realisable value after providing for any foreseeable
losses.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |39
NOTES ON THE FINANCIAL STATEMENTS
1.
(i)
Summary of Significant Accounting Policies (Continued)
Investments and Other Financial Assets
All equity investments are measured at fair value. Equity investments that are held for trading are measured at
fair value through profit or loss. For all other equity investments, the group can make an irrevocable election at
initial recognition of each investment to recognise changes in fair value through other comprehensive income
(OCI) rather than profit or loss.
All current investments in equity investments are classified as at fair value through other comprehensive
income. Such investments are initially and subsequently measured at fair value, with the initial fair value being
cost.
Unrealised gains or losses on investments in an equity instrument are recognised in a reserve until the
investment is sold, collected or otherwise disposed of, at which time the cumulative gain or loss is transferred
to the Asset Realisation Reserve.
The Company derecognises an investment in an equity instrument when it is sold or it transfers the investment
and the transfer qualifies for derecognition in accordance with AASB 9. Upon derecognition, unrealised
gains/losses net of tax relating to the investment are transferred from the revaluation reserve to the realisation
reserve.
Interest bearing investments are recognised initially at fair value and are subsequently measured at amortised
cost. Amortised cost is calculated with any difference between cost and redemption value being recognised in
the statement of comprehensive income over the period of the investment on an effective interest basis.
(j)
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. Finance leases are capitalised at the lease’s inception at the fair
value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding
rental obligations, net of finance charges, are included in other short‐term and long‐term borrowings. Each
lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit or
loss 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. Payments made under operating leases (net of any incentives received
from the lessor) are charged to the profit or loss on a straight line basis over the period of the lease.
Lease income from operating leases where the Group is a lessor is recognised in income on a straight line basis
over the lease term.
(k)
Business Combinations
The acquisition method of accounting is used to account for all business combinations, including business
combinations involving entities or businesses under common control, 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, the liabilities incurred and the equity interests issued by the Group.
The consideration transferred also includes the fair value of any contingent consideration arrangement and the
fair value of any pre‐existing equity interest in the subsidiary.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |40
NOTES ON THE FINANCIAL STATEMENTS
1.
(k)
Summary of Significant Accounting Policies (Continued)
Business Combinations (Continued)
Acquisition‐related costs are expensed as incurred. 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. On an acquisition‐by‐acquisition basis, the Group recognises any non‐controlling
interest in the acquiree either at fair value or at the non‐controlling interest’s proportionate share of the
acquiree’s net identifiable assets.
The excess of the consideration transferred, the amount of any non‐controlling interest in the acquiree and the
acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share
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 and the measurement of all amounts has been reviewed,
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.
(l)
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 date.
(m)
Cash and Cash Equivalents
For cash flow statement presentation purposes, cash and cash equivalents include 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 converted 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
on the consolidated statement of financial position.
(n)
Property, Plant and Equipment
Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure
that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight line basis to
write off the net cost of each item of property, plant and equipment over its estimated useful life to the
consolidated entity, or in case of lease hold improvements, the shorter lease term. Estimates of remaining
useful lives are made on a regular basis for all assets.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |41
NOTES ON THE FINANCIAL STATEMENTS
1.
Summary of Significant Accounting Policies (Continued)
(n)
Property, Plant and Equipment (Continued)
The estimated useful lives are as follows:
Plant and equipment
Plant and equipment under finance lease
2 – 13 years
4 years
Gains and losses on disposals are determined by comparing proceeds with the carrying amount of the assets.
These are included in profit or loss.
(o)
i)
Intangible Assets
Software developed or acquired for sales and licensing
Research expenditure is recognised as an expense as incurred. Costs incurred on development projects
(relating to the design and testing of new or improved products) are recognised as intangible assets
when it is probable that the project will, after considering its commercial and technical feasibility, be
completed and generate future economic benefits and its costs can be measured reliably. The
expenditure capitalised comprises all directly attributable costs, including costs of materials, services,
direct labour and an appropriate proportion of overheads. Other development expenditures that do
not meet these criteria are recognised as an expense as incurred. Development costs previously
recognised as an expense are not recognised as an asset in a subsequent period. Capitalised
development costs and acquired software are recorded as intangible assets and amortised from the
point at which the asset is ready for use on a straight line basis over its useful life, which varies from
three to five years.
ii)
Software – internal management systems
Software licences used in internal management systems, whether acquired or internally developed are
stated at cost less amortisation. They are amortised on a straight line basis over the useful life from 2.5
to 5 years.
iii)
Patents and trademarks
Costs associated with patents and trademarks are expensed as incurred.
iv)
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of
the net identifiable assets of the acquired subsidiary/business at the date of acquisition. Goodwill on
acquisition is included in intangible assets. Goodwill is not amortised. Instead, goodwill is tested for
impairment annually, or more frequently if events or circumstances indicate that it might be impaired
and is carried at cost less accumulated impairment losses.
Goodwill is allocated to cash generating units for the purposes of impairment testing. The allocation is
made to those cash generating units or groups of cash generating units that are expected to benefit
from business combination in which goodwill arose, identified according to operating segments or
components of operating assets (note 2).
(p)
Trade and Other Payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of
the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30
days of recognition.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |42
NOTES ON THE FINANCIAL STATEMENTS
1.
(q)
Summary of Significant Accounting Policies (Continued)
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 profit or loss as other income or finance costs.
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 balance sheet date.
(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)
i)
Employee Benefits
Short term obligations
Liabilities for wages and salaries, including non‐monetary benefits, annual leave and long service leave
expected to be settled 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 liability for annual
leave and long service leave is recognised in the provision for employee benefits.
Other long‐term employee benefit obligations
The liability for long service leave and other benefits which is not expected to be settled within 12 months
after the end of the period in which the employees render the related service is recognised in the
provision for employee benefits and 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 periods of service. Expected future payments are discounted
using market yields at the end of the reporting period on national government bonds with terms to
maturity and currency that match, as closely as possible, the estimated future cash outflows.
ii)
Bonus plans
The Group recognises a liability and an expense for bonuses and profit‐sharing based on a formula that
takes into consideration the profit attributable to the company’s shareholders after certain adjustments.
The Group recognises a provision where contractually obliged or where there is a past practice that has
created a constructive obligation.
Liabilities for bonus plans are expected to be settled within 12 months and are measured at the amounts
expected to be paid when they are settled.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |43
NOTES ON THE FINANCIAL STATEMENTS
1.
(s)
iii)
Summary of Significant Accounting Policies (Continued)
Employee Benefits (Continued)
Superannuation
The Group has a defined contribution superannuation plan for its eligible employees. Contributions to
the defined contribution fund are recognised as an expense as they become payable. Prepaid
contributions are recognised as an asset to the extent that a cash refund or a reduction in future
payments is available.
iv)
Share‐based payments
Share‐based compensation benefits are provided to employees via the RungePincockMinarco Limited
employee share option plan (ESOP) and an employee share purchase plan. Information relating to these
schemes is set out in note 26.
The fair value of options granted under the ESOP is recognised as an employee benefit expense with a
corresponding increase in equity. The total amount to be expensed is determined by reference to the fair
value of the options granted, which includes any market performance conditions, but excludes the impact
of any service and non‐market performance vesting conditions.
Non‐market vesting conditions are included in assumptions about the number of options that are
expected to vest. The total expense is recognised over the vesting period, which is the period over which
all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its
estimates of the number of options that are expected to vest based on the non‐market vesting conditions.
It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding
adjustment to equity.
(t)
Value Added Taxes (Including Goods and Services Tax)
Revenues, expenses and assets are recognised net of the amount of Value Added Tax (VAT), except where the
amount of VAT is not recoverable from the relevant tax authority. In these circumstances the VAT is recognised
as part of the cost of acquisition of the asset or as part of the item as expense.
Receivables and payables are stated with the amount of VAT included. The net amount of VAT recoverable
from, or payable to, the relevant tax authority is included as a current asset or liability in the consolidated
statement of financial position.
Cash flows are presented on a gross basis. The VAT components of the cash flows arising from investing and
financing activities which are recoverable from, or payable to, the relevant tax authority are classified as
operating cash flows.
(u)
Contributed Equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds.
(v)
i)
Earnings per Share
Basic earnings per share
Basic earnings per share is calculated by dividing:
•
•
the profit attributable to owners 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.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |44
NOTES ON THE FINANCIAL STATEMENTS
1.
(v)
ii)
Summary of Significant Accounting Policies (Continued)
Earnings per Share (Continued)
Diluted earnings per share
Dilutive earnings per share adjusts the figures used in determination of basic earnings per share to take
into account:
•
•
the after income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares
the weighted average number of additional ordinary shares that would have been outstanding
assuming the conversion of all dilutive potential ordinary shares.
(w)
Financial Guarantee Contracts
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The
liability is initially measured at fair value and subsequently at the higher of the amount determined in
accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets and the amount initially
recognised less cumulative amortisation, where appropriate.
(x)
Rounding of Amounts
The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that
Class Order amounts in the financial report and Directors’ report have been rounded off to the nearest
thousand dollars, unless otherwise stated.
(y)
Comparative Figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in
presentation for the current financial year.
(z)
Critical Accounting Estimates and Significant Judgments
The preparation of the financial report in conformity with Australian Accounting Standards requires the use of
certain critical accounting estimates. It also requires management to exercise judgment in the process of
applying the accounting policies. The notes in the financial statements set out areas involving a higher degree
of judgment or complexity, or areas where assumptions are significant to the financial report such as:
•
•
intangible assets, including goodwill (note 12),
impairment of receivables (note 8 and note 1(g)).
Estimates and judgments are continually evaluated and are based on historical experience and other factors,
including reasonable expectations of future events. Management believes the estimates used in preparation of
the financial report are reasonable.
(aa)
Parent Entity Financial Information
The financial information for the parent entity, RungePincockMinarco Limited, disclosed in note 28 has been
prepared on the same basis as the consolidated financial statements, except as set our below:
(i)
Investments in subsidiaries
Investment in subsidiaries are accounted for at cost in the financial statements of RungePincockMinarco
Limited.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |45
NOTES ON THE FINANCIAL STATEMENTS
1.
Summary of Significant Accounting Policies (Continued)
(bb) New Accounting Standards and Interpretations Not Yet Adopted
Relevant accounting standards and interpretations that have recently been issued or amended but are not yet
effective and have not been adopted for the annual reporting period ended 30 June 2013, are as follows:
Standard/Interpretation
Application
date*
Application date
for the Group*
AASB 10 Consolidated Financial Statements
AASB 11 Joint Arrangements
AASB 12 Disclosure of Interests in Other Entities
AASB 13 Fair Value Measurement
AASB 2011‐4 Amendments to Australian Accounting Standards to Remove
Individual Key Management Personnel Disclosures
AASB 2012‐2 & AASB 2012‐3 Amendments to Australian Accounting
Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities
[AASB 7 & AASB 132]
AASB 2012‐5 Amendments to Australian Accounting Standards arising from
Annual Improvements 2009–2011 Cycle [AASB 1, AASB 101, AASB 116, AASB
132 & AASB 134 and Interpretation 2]
1 Jan 2013
1 Jan 2013
1 Jan 2013
1 Jan 2013
1 Jul 2013
1 Jul 2013
1 Jul 2013
1 Jul 2013
1 Jul 2013
1 Jul 2013
1 Jan 2013 & 1 Jan
2014
1 Jul 2013 & 1
Jul 2014
1 Jan 2013
1 Jul 2013
*
Application date is for annual reporting periods beginning on or after the date shown in the above table.
The Directors anticipate that the adoption of these Standards and Interpretations in future years may have the
following impacts:
AASB 10 ‐ This standard replaces part of AASB 127: 'Consolidated and Separated Financial Statements' and
introduces a new definition of control that determines which entities are consolidated, which requires that
three elements of control (power over investee, exposure or rights to variable returns, and ability to use power
to affect such returns) must be present in order to conclude that an investor controls an investee. The Group
does not consider that the application of this new standard will have an impact upon the composition of the
consolidated entity.
AASB 11 – The group’s interest in a joint venture will be equity accounted. The Group does not consider that the
application of this new standard will have an impact upon the composition of the consolidated entity.
AASB 12 ‐ provides the disclosure requirements for entities that have an interest in a subsidiary, a joint
arrangement, an associate or an unconsolidated structured entity. As such, it pulls together and replaces
disclosure requirements from many existing standards. The Group is not expecting the standard to have a
significant impact on the Group’s financial statements.
AASB 13 ‐ Establishes a single course of guidance for determining the fair value of assets and liabilities. The
application of this standard is not expected to impact upon the Group’s fair value measurements or disclosures
thereof.
AASB 2012‐2, AASB 2012‐3 and AASB 2012‐5 – These amendments introduce various changes to IFRS. The
Group is not expecting the amendments to have a significant impact on the Group’s financial statements.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |46
NOTES ON THE FINANCIAL STATEMENTS
2.
Operating Segments
Operating segments are reported in a manner consistent with the internal reporting provided to the Managing
Director in order to make decisions about resource allocations and to assess performance of the Group. The
reports are split into geographical areas. GeoGAS operations are based in Australia and are reported separately.
Segment revenue, expenses and results include transfers between segments. Such transfers are priced on an
“arms‐length” basis and are eliminated on consolidation. Each segment, other than GeoGAS, sells all the
products and services provided by the Group.
Previously the software development department was part of the “Australia” segment and received notional
revenue from sales of software and maintenance from other segments. The department is now included in
“unallocated costs – software development and IT”. June 2012 segments were restated to align with the current
internal reporting structure.
Information about reportable segments
2013
Australia
Asia
$’000
America
$’000
Africa
$’000
GeoGAS
Consolidated
$’000
$’000
Revenue
Services
Licence sales
Software maintenance
Other revenue
Total External sales
Inter‐segment sales
Total Revenue
Rechargeable expenses
Net revenue
Total Expenses
Segment profit/(loss)
2012
Revenue
Services
Licence sales
Software maintenance
Other revenue
Total External sales
Inter‐segment sales
Total Revenue
Rechargeable expenses
Net revenue
Total Expenses
$’000
20,732
2,452
4,944
8
28,136
3,290
31,426
(923)
30,503
(21,530)
8,973
33,996
5,341
4,210
6
43,553
2,965
46,518
(2,194)
44,324
14,222
1,551
853
100
16,726
(2,806)
13,920
(1,284)
12,636
(9,301)
3,335
18,418
1,619
684
128
20,849
(2,406)
18,443
(1,905)
16,538
15,139
1,714
3,112
32
19,997
(382)
19,615
(2,720)
16,895
1,644
1,106
2,439
‐
5,189
84
5,273
(143)
5,130
(12,729)
4,166
(3,656)
1,474
18,407
2,327
2,845
5
23,584
(180)
23,404
(2,861)
20,543
2,927
1,608
2,087
‐
6,622
60
6,682
(331)
6,351
8,550
‐
‐
21
8,571
(186)
8,385
(725)
7,660
(5,528)
2,132
11,839
‐
‐
13
11,852
(439)
11,413
(272)
11,141
(7,176)
3,965
60,287
6,823
11,348
161
78,619
‐
78,619
(5,795)
72,824
(52,744)
20,080
85,587
10,895
9,826
152
106,460
‐
106,460
(7,563)
98,897
(65,243)
33,654
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |47
Segment profit/(loss)
14,618
5,971
7,578
1,522
(29,706)
(10,567)
(12,965)
(4,829)
NOTES ON THE FINANCIAL STATEMENTS
2.
Operating Segments (Continued)
Geographical Information
Segment revenue is based on the geographical location of customers and segment assets are based on the
geographical location of the assets.
2013
2012
Australia
Indonesia
Canada
USA
South Africa
Hong Kong
Mongolia
China
Brazil
Japan
India
Other
Revenues
$,000
31,053
9,346
7,951
5,502
4,971
2,757
2,333
1,995
1,920
1,391
1,169
8,231
78,619
Non‐current
assets1
$,000
Revenues
$,000
Non‐current
assets1
$,000
27,209
183
102
1,747
384
131
20
181
81
‐
‐
77
30,115
49,555
9,024
8,728
5,021
4,862
4,432
2,213
3,469
1,757
1,713
1,111
14,575
106,460
27,818
318
59
1,596
838
118
18
206
105
‐
‐
84
31,160
1Excludes financial instruments and deferred tax assets.
Reconciliation of segment profit to reported net profit:
Segment profit
Adjustments:
Foreign exchange gains/(losses)
Employment benefits ‐ corporate
Employment benefits ‐ Software development and IT
Other unallocated costs ‐ corporate
Other unallocated costs ‐ Software development and IT
Restructure and impairment costs
Depreciation and amortisation
Net finance costs
Life insurance proceeds
Unallocated income
Profit/(loss) before income tax
Income tax benefit/(expense)
Net profit/(loss)
2013
$'000
2012
$'000
20,080
33,654
153
(5,001)
(6,647)
(5,402)
(2,257)
(5,416)
(3,794)
(432)
‐
924
(7,792)
227
(7,565)
(81)
(6,211)
(6,411)
(5,888)
(3,451)
‐
(5,272)
(514)
1,969
453
8,248
(2,011)
6,237
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |48
NOTES ON THE FINANCIAL STATEMENTS
2.
Operating Segments (Continued)
Reconciliation of operating segment revenue and non‐current assets to amounts reported in the consolidated
statement of comprehensive income:
2013
2012
Net Revenue
$'000
Non‐current
Assets1
$’000
Net Revenue
$'000
Non‐current
Assets1
$’000
Operating segment
Head office sublease
Foreign exchange gains
Unallocated corporate assets
Reported
1 Excludes financial instruments and deferred tax assets
3.
Profit Before Income Tax
72,824
30,115
924
153
‐
73,901
‐
‐
5,766
35,881
98,897
453
‐
‐
99,350
31,160
‐
‐
7,984
39,144
Profit before income tax includes the following specific expenses / (income)
Defined contributions superannuation expense
Impairment of receivables
Increase/(Reduction) in provision for impairment of receivables
Rental expense relating to operating leases ‐ Minimum lease payments
Net loss on disposal of plant and equipment
Foreign exchange (gains) / losses
4.
Restructure and Impairment Costs
2013
$'000
2012
$'000
2,548
578
320
6,144
6
(153)
2,628
60
(141)
6,018
63
81
Following the appointment of Richard Mathews to the role of Managing Director and Chief Executive Officer at
the end of August 2012, the Group undertook a program of cost reduction and restructuring initiatives to better
align the business with the change in the operating environment. The costs incurred in these activities include:
Impairment costs:
Plant and equipment (fitout)
Goodwill – South Africa
Software development costs
Other Restructure costs:
Employment termination costs
Onerous lease obligations
Other closure costs
701
384
321
1,406
2,540
1,284
186
4,010
5,416
‐
‐
‐
‐
‐
‐
‐
‐
‐
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |49
NOTES ON THE FINANCIAL STATEMENTS
5.
Income Tax Expense
Tax Recognised in profit or loss
Income tax expense
Current tax
Deferred tax
Adjustments to prior periods
Income tax benefit/(expense)
Numerical reconciliation of income tax expense to prima facie tax
Profit/(Loss) before income tax
Tax at the Australian tax rate of 30% (2012: 30%)
Tax effect of amounts which are not taxable/(deductible)
in calculating taxable income:
Attributed income
Non‐assessable income/(non‐deductible expense)
Research and development deduction
Unutilised foreign tax credits
Derecognised deferred tax assets
Difference in overseas tax rates
Adjustments to prior periods
Income tax benefit/(expense)
Tax consolidation legislation
2013
$'000
2012
$'000
(1,390)
1,641
(24)
227
(7,792)
2,338
(9)
(202)
222
(960)
(1,030)
359
(108)
(24)
227
(2,813)
899
(97)
(2,011)
8,248
(2,474)
(30)
323
232
‐
‐
(1,949)
35
(97)
(2,011)
RungePincockMinarco Limited and its wholly‐owned Australian controlled entities implemented the tax
consolidation regime from 13 March 2007.
On adoption of the tax consolidation legislation, the entities in the tax consolidated Group entered into a tax
sharing agreement which, in the opinion of the Directors, limits the joint and several liability of the wholly‐
owned entities in the case of a default by the head entity, RungePincockMinarco Limited.
The entities have also entered into a tax funding agreement under which the wholly‐owned entities fully
compensate RungePincockMinarco Limited for any current tax payable assumed and are compensated for any
current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are
transferred to RungePincockMinarco Limited under the tax consolidated legislation. The funding amounts are
determined by reference to the amounts recognised in the wholly‐owned entities’ financial statements.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |50
NOTES ON THE FINANCIAL STATEMENTS
6.
Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are attributable to the following:
2013
$'000
2012
$'000
Provision for impairment of receivables
Employee benefits provision
Lease incentive liabilities
Tax loss
Unearned income
Accrued expenses
Share capital raising costs
Financial assets at fair value
Other deferred tax assets
Work in progress
Intangibles
Property, plant and equipment
Prepayments
Other deferred tax liabilities
Deferred tax assets
Deferred tax liabilities
Net tax assets
Movements
Balance at 1 July
Recognised in profit or loss
Recognised in other comprehensive income
Recognised in equity
Adjustments to prior periods
Balance at 30 June
Unrecognised deferred tax assets
Foreign tax credits
Tax losses
Capital losses
Deductible temporary differences
76
1,115
1,358
3,493
478
76
154
3
189
(89)
(376)
(346)
(194)
(30)
6,143
(236)
5,907
4,760
1,641
(480)
105
(119)
5,907
211
136
485
889
1,721
79
2,239
1,274
482
333
726
60
483
427
(91)
47
(986)
(266)
(47)
4,807
(47)
4,760
4,152
899
31
‐
(322)
4,760
‐
‐
‐
‐
‐
Foreign tax credits will expire in 2017. Tax Losses expire in 2015. Capital losses do not expire, however, it is not
probably that the Group would generate capital gains to utilise the benefit. Deductible temporary differences
have not been recognised because it is not probably that sufficient future taxable profit will be available.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |51
NOTES ON THE FINANCIAL STATEMENTS
7.
Cash and Cash Equivalents
Cash at bank
Deposits
8.
Trade and Other Receivables
Current
Trade receivables
Provision for impairment of receivables
Other receivables
Non‐current
Other receivables ‐ refundable deposits
2013
$'000
4,541
2,387
6,928
2012
$'000
8,190
3,951
12,141
2013
$’000
2012
$’000
17,413
(602)
16,811
76
16,887
348
348
23,141
(282)
22,859
100
22,959
269
269
As at 30 June 2013, trade receivables of $9,601,000 (2012: $10,733,000) were past due but not impaired. These
relate to a number of independent customers for whom there is no recent history of default. The ageing of the
trade receivables past due at the reporting date but not impaired was:
Past due less than 30 days
Past due between 31‐90 days
Past due more than 90 days
The movement in the provision for impairment of trade receivables was as follows:
Balance at 1 July
Provision no longer required
Debtors written off
Impairment loss recognised
Effect of foreign exchange
Balance at 30 June
3,928
3,263
2,410
9,601
282
(18)
(277)
578
37
602
5,184
3,016
2,533
10,733
415
(141)
(58)
60
6
282
The provision for impairment of trade receivables in 2013 and 2012 relates to receivables that are past due for
more than 90 days.
9.
Work in Progress
Work in progress
10.
Other Assets
Prepayments
1,998
2,566
1,583
2,048
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |52
NOTES ON THE FINANCIAL STATEMENTS
11.
Property, Plant and Equipment
Plant and equipment ‐ at cost
Less: accumulated depreciation
Plant and equipment under finance lease
Less: accumulated depreciation
2013
Balance at 1 July 2012
Exchange differences
Additions
Impairment
Disposals
Depreciation
Balance at 30 June 2013
2012
Balance at 1 July 2011
Exchange differences
Additions
Disposals
Depreciation
Balance at 30 June 2012
2013
$’000
2012
$’000
17,944
(9,745)
8,199
33
(32)
1
17,977
(7,787)
10,190
31
(22)
9
8,200
10,199
Note
4
Plant and equipment
Owned
$’000
Under
finance lease
$’000
Total
$’000
10,190
40
970
(701)
(69)
(2,231)
8,199
9,034
(57)
4,074
(108)
(2,753)
10,190
9
1
‐
‐
‐
(9)
1
17
1
‐
‐
(9)
9
10,199
41
970
(701)
(69)
(2,240)
8,200
9,051
(56)
4,074
(108)
(2,762)
10,199
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |53
NOTES ON THE FINANCIAL STATEMENTS
12.
Intangible Assets
Software for sale and licensing – at cost
Less: accumulated amortisation
Software for internal use – at cost
Less: accumulated amortisation
Customer relationships and contracts – at cost
Less: accumulated amortisation
Goodwill – at cost
Less: impairment losses
2013
$'000
2012
$'000
5,623
(4,039)
1,584
6,756
(5,073)
1,683
1,494
(1,494)
‐
24,450
(384)
24,066
27,333
5,714
(3,856)
1,858
6,399
(3,871)
2,528
1,494
(1,494)
‐
24,290
‐
24,290
28,676
Software
For Sales to
Customers 1
For Internal
Use
Customer
relationships and
contracts
Goodwill
Total
$'000
$'000
$'000
$'000
$'000
‐
‐
‐
‐
‐
‐
‐
1,858
341
‐
‐
(227)
(388)
1,584
24,290
‐
‐
160
(384)
‐
24,066
2,528
394
‐
21
(94)
(1,166)
1,683
2013
Balance at 1 July 2012
Additions
Disposal
Exchange differences
Impairment 2
Amortisation 3
Balance at 30 June 2013
2012
Balance at 1 July 2011
Additions
Impairment
Disposal
Exchange differences
Amortisation 3
Balance at 30 June 2012
1 Software consists of capitalised development costs.
2 The carrying amount of intangible assets has been reduced to its recoverable amount through recognition of an
impairment loss against software and goodwill. This loss has been disclosed as a separate line item in profit and loss.
3 Amortisation of $1,554,000 (2012: $2,510,000) is included in amortisation expense in profit or loss.
2,678
950
‐
‐
1
(1,101)
2,413
454
‐
‐
‐
(1,009)
24,226
‐
‐
‐
64
‐
‐
‐
‐
(400)
24,290
1,858
2,528
400
‐
28,676
735
‐
181
(705)
(1,554)
27,333
29,717
1,404
‐
‐
65
(2,510)
28,676
(a) Impairment Tests for Goodwill
Goodwill is allocated to the Group's cash generating units (CGUs) according to business unit and the country of
operation.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |54
NOTES ON THE FINANCIAL STATEMENTS
12.
Intangible Assets (Continued)
A segment level summary of the goodwill is presented below.
Australia
Australia – GeoGAS
USA
Africa
2013
$'000
2012
$'000
17,547
4,921
1,598
‐
24,066
17,547
4,921
1,439
383
24,290
(b) Key assumptions used for value‐in‐use calculations
In the current and prior years the recoverable amount of the CGUs has been determined by value‐in‐use
calculations. These calculations were based on the following key assumptions:
Australia
Australia – GeoGAS
USA4
Margin1
Growth Rate2
Discount Rate3
2013
16%
35%
20%
2012
16%
31%
16%
2013
1.0%
1.0%
1.0%
2012
2.5%
2.5%
1.0%
2013
19%
18%
22%
2012
15%
15%
12%
8%
10%
Africa
1 Budgeted gross margin
2 Weighted average growth rate used to extrapolate cash flows beyond the budget period
3 In performing the value‐in‐use calculations for each CGU, the group has applied post‐tax discount rates to discount the
forecast future attributable post‐tax cash flows. The equivalent pre‐tax discount rates are disclosed above
4 Part of the American operating segment
2.5%
0.0%
19%
17%
These assumptions have been used for the analysis of each CGU. Cash flows were projected based on approved
financial budgets and management projections over a five year period. Management determined budgeted
gross margin based on past performance and its expectations for the future. The weighted average growth rates
used are consistent with forecasts included in industry reports. The discount rates used reflect specific risks
relating to the relevant segments and the countries in which they operate.
(c) Impairment charges
Based on the above and three years of poor performance, impairment of $384,000 has been applied as the
carrying amount of goodwill exceeded its recoverable amount for the African region.
(d) Sensitivity analysis
If the pre‐tax discount rate applied to the cash projections of all CGUs was increased by 500 basis points to be in
a range between 23% and 27%, the recoverable amount of Australian and American CGU’s goodwill is still
greater than its carrying amount.
13.
Trade and Other Payables
Current
Trade payables
Other payables and accruals
2013
$'000
2012
$'000
1,976
3,178
5,154
3,332
4,065
7,397
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |55
NOTES ON THE FINANCIAL STATEMENTS
14.
Borrowings
Current
Lease liabilities (note 22)
Non‐current
Lease liabilities (note 22)
Bank loans ‐ secured
Terms and Conditions
Borrowing
facilities
Currency
Nominal
interest
rate
2013
$'000
2012
$'000
14
14
‐
‐
‐
5
5
13
5,000
5,013
2013
2012
Secured loan
Finance leases
AUD
CAD
6.13%
4.90%
Sep 2014
Oct 2013
Loans and Borrowings
Other facilities
Maturity
Facility
$’000
15,000
14
15,014
Utilised
$’000
Facility
$’000
Utilised
$’000
‐
14
14
15,000
18
15,018
5,000
18
5,018
Bank guarantee
AUD
2%
3,112
2,635
3,112
2,539
The Australian dollar loan facilities including the bank guarantee are secured by a first registered equitable
mortgage over the Group’s assets, including uncalled capital.
Lease liabilities are effectively secured as the rights to the leased assets revert to the lessor in the event of
default.
15.
Provisions
Current
Employee benefits
Non‐current
Employee benefits
16.
Other Liabilities
Current
Unearned income ‐ software maintenance
Unearned income ‐ consulting and other
Lease incentive and make good obligations
Non‐current
2013
$'000
2012
$'000
3,285
7,906
640
197
5,660
3,146
993
9,799
5,528
4,459
679
10,666
Lease incentive and make good obligations
3,713
3,504
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |56
NOTES ON THE FINANCIAL STATEMENTS
17.
Contributed Equity
Share capital
Ordinary shares
‐ fully paid
‐ partially paid
Movements in Share Capital:
Date
30/06/2011
Balance
Partly paid shares paid up
30/06/2012
Balance
Partly paid shares paid up
Issue of share capital
Costs of issue
Exercise of employee options
30/06/2013
Balance
Ordinary Shares
2013
Number
2012
Number
2013
$'000
2012
$'000
141,345,216
124,034,845
‐
141,345,216
45,155
124,080,000
48,664
‐
48,664
39,402
16
39,418
Ordinary shares
Number
$’000
124,080,000
‐
124,080,000
‐
17,249,482
‐
15,734
39,408
10
39,418
2
9,487
(252)
9
141,345,216
48,664
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 showing 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.
Issue of ordinary shares
In April 2013 the company issued 15,776,000 ordinary shares at an issue price of $0.55 per share to institutional
investors in Australia. Additionally in May 2013 the company issued 1,473,482 new shares at an issue price of
$0.55 per share as a result of a share purchase plan.
Options
Information relating to the Runge Employee Share Option Plan (ESOP), including details of options issued,
exercised and lapsed during the financial year and options outstanding at the end of financial year, is set out in
note 26.
Capital Risk Management
The Group’s objectives when managing capital include safeguarding the ability to continue as a going concern,
so they continue to provide returns for shareholders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |57
NOTES ON THE FINANCIAL STATEMENTS
17.
Contributed Equity (Continued)
Capital Risk Management (Continued)
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. The Group does not
have any externally imposed capital requirements.
Consistent with the industry practice, the Group monitors capital on the basis of the gearing ratio. This ratio is
calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘borrowings’
and ‘trade and other payables’ as shown in the consolidated 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 2013 and 30 June 2012 were as follows:
Total borrowings, trade and other payables
Less: cash and cash equivalents
Net (cash) / debt
Total equity
Total capital
Gearing ratio
18.
Reserves and Retained Profits
Reserves
Share‐based payments (i)
Foreign currency translation (ii)
Financial assets revaluation reserve (iii)
Revaluation surplus
Reserve arising from an equity transaction (iv)
Nature and Purpose of Reserves
(i)
Share‐based payments
Notes
7
2013
$'000
5,168
(6,928)
(1,760)
47,668
45,908
n/a
2012
$'000
12,415
(12,141)
274
48,320
48,594
0.6%
697
(1,547)
(1,601)
18
(1,553)
(3,986)
726
(2,205)
(1,121)
18
(1,553)
(4,135)
The fair value of options issued to employees is recognised as an employment cost during the option vesting
period with corresponding increase in equity recognised in the employee option reserve.
(ii)
Foreign currency translation
Exchange differences arising on translation of the foreign controlled entities are taken to the foreign currency
translation reserve, as described in accounting policy note 1(e).
(iii) Financial assets revaluation reserve
Changes in the fair value of investments are recognized in equity securities in other comprehensive income.
These changes are accumulated in a separate reserve within equity. The entity has a policy on transferring
amounts from this reserve to an asset realization reserve.
(iv) Reserve arising from an equity transaction
Arose from the acquisition of an additional interest in the controlled entity, MRM Mining Services (Pty) Ltd.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |58
NOTES ON THE FINANCIAL STATEMENTS
18.
Reserves and Retained Profits (Continued)
Movement in Reserves
Share‐based payments
2013
$'000
2012
$'000
Foreign Currency
Translation
2013
$'000
2012
$'000
Financial Assets
Revaluation Reserve
2012
2013
$'000
$'000
726
(29)
‐
‐
‐
697
618
108
‐
‐
‐
726
(2,205)
‐
‐
‐
658
(1,547)
(2,033)
‐
‐
‐
(172)
(2,205)
(1,121)
‐
‐
(480)
‐
(1,601)
(1,049)
‐
(103)
31
‐
(1,121)
Balance at 1 July
Options expensed
Change in fair value
Income tax
Foreign currency translation
Balance at 30 June
There were no other movements in reserves in 2013 and 2012.
Retained Profits
Balance at 1 July
Net profit / (loss) for the year
Dividends provided for or paid
Balance at 30 June
19.
Dividends
Dividends paid in cash during the year were:
Full year dividend of 1.0 cents per share 50% franked paid on 5 October 2012
Special dividend of 1.0 cents per share unfranked paid on 5 October 2012
Final dividend of 1.0 cents per share unfranked paid on 6 October 2011
Interim dividend of 1.0 cents per share unfranked paid on 5 April 2012
2013
$'000
2012
$'000
13,037
(7,565)
(2,482)
2,990
1,241
1,241
‐
‐
2,482
9,282
6,237
(2,482)
13,037
‐
‐
1,241
1,241
2,482
Franked Dividends
Franking credits available for subsequent financial years based on a tax rate of 30%
(2012: 30%)
‐
433
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for any:
(a)
(b)
(c)
(d)
(e)
franking credits that will arise from the payment of the current tax liability;
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date;
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date;
franking credits that may be prevented from being distributed in subsequent financial years; and
franking credits acquired with subsidiaries that form a tax consolidated group with the parent entity.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |59
NOTES ON THE FINANCIAL STATEMENTS
20.
Key Management Personnel Disclosures
Key Management Personnel Compensation
(a)
Short term employee benefits
Post‐employment benefits
Termination benefits
Share‐based payments
2013
$
1,738,242
121,735
955,864
(71,454)
2012
$
2,287,762
151,505
76,667
67,757
2,744,387
2,583,691
(b)
Shareholdings by Key Management Personnel
The number of shares and options over shares in the Company held during the financial year by each Director of
RungePincockMinarco Limited and each of the other key management personnel of the Group, including their
personally‐related entities, is set out below:
(i)
Ordinary Shares
Balance
1 July 2011
Sold
during
the year
Acquired
during
the year *
Balance
30 June 2012
Sold
during
the year
Acquired
during
the year**
Balance
30 June 2013
Directors
A Brackin
Dr I Runge
R Walker
R Mathews
D Meldrum
C Larsen
‐
16,091,945
400,000
6,202,874
5,692,910
4,634,375
‐
‐
‐
‐
‐
‐
Other key management personnel of the Group
K Wallis
‐
M Kochanowski
69,371
J O’Neill
‐
‐
‐
‐
300,000
191,266
200,000
‐
191,266
‐
‐
‐
‐
300,000
16,283,211
600,000
6,202,874
5,884,176
4,634,375
‐
69,371
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
27,273
27,273
27,273
327,273
16,310,484
627,273
309,129
6,512,003
‐
‐
***5,884,176
***4,634,375
17,552
‐
‐
17,552
69,371
‐
‐
K Lewis
***‐
* Acquired off‐market at the closing price on ASX on the date of transfer, except for Ross Walker who bought 8,734 shares
on market.
** Acquired through share purchase plan, on market or from exercise of options.
*** Balance at resignation date.
‐
‐
‐
‐
‐
No shares were granted as compensation in 2013 (2012: nil).
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |60
NOTES ON THE FINANCIAL STATEMENTS
20.
(ii)
Key Management Personnel Disclosures (Continued)
Options
Name
Directors
A Brackin
Dr I Runge
R Walker
R Mathews
D Meldrum
Balance
1 July
2011
Options
granted
as
compen‐
sation
Options
forfeited
and
expired
Balance
30 June
2012
Options
granted
as
compen‐
sation
Options
forfeited
and
expired
Options
exer‐
cised
Balance
30 June
2013
Options
vested
and
exercise‐
able
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
370,749
665,000
(202,749)
833,000
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
(810,600)
(295,600)
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
*22,400
*22,400
22,400
22,400
(202,749)
C Larsen
Other key management personnel of the Group
150,000
370,749
K Wallis
118,000
150,000
M Kochanowski
79,000
50,000
318,000
268,000
129,000
‐
‐
‐
J O’Neill
K Lewis
‐
‐
‐
115,000
‐
254,116
150,000
(136,116)
268,000
‐
(252,266)
2,800
(70,800)
(15,734)
184,266
33,400
(47,400)
‐
‐
‐
125,534
115,000
*10,354
‐
10,534
‐
10,534
* Balance at resignation date.
Other Transactions with Key Management Personnel
(c)
The Group employs the services of Pitcher Partners Chartered Accountants (Previously Johnston Rorke
Chartered Accountants), an entity associated with Ross Walker. Pitcher Partners received $80,290 (2012:
$48,660) for taxation and advisory services. Amount payable at year end $nil (2012: $nil)
Aggregate amounts of each of the above types of other transactions with key management personnel of
RungePincockMinarco Limited:
Amounts recognised as expense
Professional fees
2013
$
2012
$
80,290
80,290
48,660
48,660
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |61
NOTES ON THE FINANCIAL STATEMENTS
21.
Remuneration of Auditors
During the year the following fees were paid or payable for services provided by the auditors of the Group, and
its related entities.
Audit services ‐ Audit and review of the financial reports:
Auditor of the parent entity:
BDO Audit Pty Ltd
Auditors of subsidiaries:
PKF Malaysia
BDO South Africa
BDO Hong Kong
BDO Indonesia
PKF South Africa
PKF Hong Kong
Johan Malonda Mustika & Rekan Indonesia
Unistar – Mongolia
22.
(a)
Commitments
Non‐cancellable Operating Leases
2013
$
2012
$
150,000
181,801
2,053
21,725
14,400
13,650
‐
‐
‐
2,997
204,825
5,064
‐
‐
‐
23,215
11,324
9,973
2,963
234,340
The Group leases various offices under non‐cancellable operating leases expiring within one to seven years. The
leases have varying terms, escalation clauses and renewal rights. On renewal the terms of the lease are
generally renegotiated. Excess office space is sub‐let to third parties also under non‐cancellable operating
leases.
Commitments for minimum lease payments in relation to non‐cancellable operating leases are payable:
2013
$’000
2012
$’000
Within one year
Later than one year but not later than 5 years
Later than 5 years
Commitments not recognised in the financial statements
6,074
10,684
1,566
18,324
Sub‐lease payments
Future minimum lease payments to be received in relation to non‐cancellable sub‐leases of operating leases:
Within one year
Later than one year but not later than 5 years
602
133
735
5,512
13,086
2,856
21,454
803
205
1,008
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |62
NOTES ON THE FINANCIAL STATEMENTS
22.
(b)
Commitments (Continued)
Finance Leases
Commitments in relation to finance leases are payable:
Within one year
Later than one year but not later than 5 years
Minimum lease payments
Less: future finance charges
Recognised as a liability
Representing lease liabilities:
Current
Non‐current
2013
$’000
2012
$’000
14
1
15
(1)
14
14
‐
14
6
13
19
(1)
18
5
13
18
Finance leases relate to motor vehicles which have residual payments with options to purchase at the end of
the lease term.
23.
Reconciliation of Net Profit to Net Cash Inflow / (outflow) from Operating Activities
Net profit / (loss)
Depreciation and amortisation
Provision for impairment of receivables
Net loss on sale of property, plant and equipment
Impairment
Net exchange differences
Employee share options
Change in operating assets and liabilities
Decrease / (increase) in trade and other receivables
Decrease / (increase) in current tax asset
Decrease / (increase) in deferred tax asset
Decrease / (increase) in work in progress
Decrease / (increase) in other assets
Increase / (decrease) in trade and other payables
Increase / (decrease) in other liabilities
Increase / (decrease) in current tax liabilities
Increase / (decrease) in deferred tax liability
Increase / (decrease) in provisions
Net cash inflow / (outflow) from operating activities
Non cash financing and investing activities include:
Additions to plant and equipment
Total non cash financing and investing activities
(7,565)
3,794
320
63
1,406
(81)
(29)
6,242
(938)
(97)
568
(79)
(2,243)
(1,180)
(761)
(1,530)
(3,738)
(5,848)
82
82
6,237
5,272
(133)
63
‐
(32)
108
(2,569)
(64)
(621)
(267)
17
869
997
169
13
1,006
11,065
243
243
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |63
NOTES ON THE FINANCIAL STATEMENTS
24.
Financial Risk Management
The Group has exposure to the following risks from its use of financial instruments:
•
•
•
credit risk;
liquidity risk; and
market risk.
This note presents information about the Group’s exposure to each of the above risks, the objectives, policies
and processes for measuring and managing risk.
The Board of Directors is ultimately responsible for reviewing, ratifying and monitoring systems of internal
controls and risk management. The Board has established an Audit and Risk Committee, which is responsible
for overseeing risk management systems.
The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the financial performance of the Group. The Group’s finance division is
responsible for development and maintenance of policies which deal with each type of risk related to use of
financial instruments.
The Group holds the following financial instruments:
Financial assets
Cash and cash equivalents
Trade and other receivables 1
Financial liabilities
Trade and other payables 2
Borrowings 2
1 Loans and receivables
2 At amortised cost
(a)
Credit Risk
2013
$'000
2012
$'000
6,928
17,235
24,163
5,154
14
5,168
12,141
23,228
35,369
7,397
5,018
12,415
Credit risk is the risk of financial loss to the Group if a customer or a counter party to a financial instrument fails
to meet its contractual obligations and arises principally from the Group’s cash and cash equivalents and its
receivables from customers.
The Group does not require guarantees or collateral of its trade and other receivables. In some foreign regions
the Group works on a prepayment basis to avoid credit risk.
The Group has established an allowance for impairment that represents an estimate of incurred losses in
respect of trade receivables. This allowance is determined based on the specific information regarding
conditions of a particular individual debt. The information regarding the receivables ageing is monitored by
both finance and operations management.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |64
NOTES ON THE FINANCIAL STATEMENTS
24.
(a)
Financial Risk Management (Continued)
Credit Risk (Continued)
The maximum credit risk exposure of financial assets of the Group is represented by the carrying amounts of
financial assets set out above. The Group had no significant concentrations of credit risk with any single
counterparty or group of counterparties, other than banks or financial institutions.
53% of cash and trade receivables are held with ‘A’, ‘BAA’, ‘BAA’ or ‘BA’ – rated customers and banks (2012:
57%). The ratings used are set by Moody’s as at the end of the financial year. Analysis of the maximum
exposure to credit risk for financial assets at balance date by counterparts’ credit rating:
A ‐ rated counterparts
B ‐ rated counterparts
Unrated counterparts
(b)
Liquidity Risk
2013
$'000
5,871
6,877
11,415
24,163
2012
$'000
18,955
1,376
15,038
35,369
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The
Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity
to meet its liabilities when due without incurring unacceptable losses or risking damage to the Group’s
reputation.
The Group regularly reviews cashflow forecasts, maintains sufficient cash on demand and has unutilised
borrowing facilities disclosed in note 14.
Contractual maturities of the Group’s financial liabilities, including interest thereon, is as follows:
2013
Carrying
amount
Contractual
cash flows
6 mths or
less
6‐12 mths
1‐2 years
2‐5 years
Finance lease liabilities
Trade and other payables
2012
Secured bank loans
Finance lease liabilities
Trade and other payables
$'000
$'000
$'000
$'000
$'000
$'000
14
5,154
5,168
5,000
18
7,397
12,415
15
5,154
5,169
5,647
19
7,397
13,063
15
5,154
5,169
144
3
7,397
7,544
‐
‐
‐
144
3
‐
147
‐
‐
‐
288
13
‐
301
‐
‐
‐
5,359
‐
‐
5,359
More
than 5
years
$'000
‐
‐
‐
‐
‐
‐
‐
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |65
NOTES ON THE FINANCIAL STATEMENTS
24.
(c)
Financial Risk Management (Continued)
Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates that will
affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable parameters, while optimising
the return.
The Group manages its exposure to interest rate and foreign currency fluctuations through a policy approved by
the Board of Directors. There are no other significant market risks affecting the Group.
Currency Risk
The current policy is not to take any forward positions. At 30 June 2013 and 2012 the Group had not entered
into any derivative contracts to hedge these exposures. The Group does not engage in any significant
transactions which are speculative in nature.
As a multinational corporation, the Group maintains operations in foreign countries and as a result of these
activities, the Group is exposed to changes in exchange rates which affect its results of operations and cash
flows.
The Group’s exposure to foreign currency risk at balance date expressed in Australian Dollars was as follows:
USD
$’000
CAD
$’000
ZAR
$’000
Other
$’000
Total
$’000
2013
Cash and deposits
Trade and other receivables
Trade and other payables
Interest bearing liabilities
2,059
9,201
(319)
‐
Net balance sheet exposure
10,941
2012
Cash and deposits
Trade and other receivables
Trade and other payables
Interest bearing liabilities
5,341
8,947
(1,600)
‐
Net balance sheet exposure
12,688
561
806
(182)
(14)
1,171
719
414
(410)
(18)
705
1,559
1,235
(93)
‐
2,701
1,102
1,705
(275)
‐
2,532
1,641
784
(733)
‐
1,692
2,401
89
(462)
‐
2,028
5,820
12,026
(1,327)
(14)
16,505
9,563
11,155
(2,747)
(18)
17,953
A 10 percent strengthening of the Australian dollar against the above currencies at 30 June 2013 based on
assets and liabilities at 30 June 2013 would have increased/(decreased) equity and profit and 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 2012.
2013
2012
Equity
$'000
Profit/(Loss)
$'000
Equity
$'000
Profit/(Loss)
$'000
(1,172)
(328)
(1,292)
(733)
A 10 percent weakening of the Australian dollar against the above currencies at 30 June 2013 would have had
equal but opposite effect on the above currencies to the amounts shown above.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |66
NOTES ON THE FINANCIAL STATEMENTS
25.
Earnings Per Share
Basic earnings per share
Diluted earnings per share
Earnings used in Calculating Earnings Per Share
Profit / (loss) attributable to the ordinary equity holders used in calculating
earnings per share
Weighted average number of ordinary shares used as the
denominator in calculating basic earnings per share
Dilutive options
Weighted average number of ordinary shares used as the
denominator in calculating diluted earnings per share
26.
Share Based Payments
Tax Exempt Share Plan
2013
Cents
(5.9)
(5.9)
2013
$’000
2012
Cents
5.0
5.0
2012
$’000
(7,565)
6,237
2013
Number ‘000
2012
Number ‘000
128,022
124,080
‐
27
128,022
124,107
The Employee Share Scheme enables the Board to issue up to $1,000 of shares tax free per employee of the
Group each year.
There were no shares issued under $1,000 Share Purchase Plan in 2013 or 2012.
Eligibility for the tax exempt share plan is approved by the board having regard to individual circumstances and
performance. No directors or key management personnel are eligible for the Tax Exempt Share Plan.
Employee Share Option Plan (ESOP)
The Employee Share Option Plan (ESOP) was approved by the Board of Directors on 5 February 2008, amended
on the 7 October 2009 and amended on 28 October 2011.
Eligible participants of the ESOP include any person who is employed by, or is a director, officer or executive, of
the Group and whom the Board or its nominee determines is eligible to participate in the Option Plan. Options
are granted at the discretion of the Board of Directors.
Consideration for granting options, grant periods, vesting and exercise dates and exercise periods are
determined by the Board of Directors in each case. Options issued under the plan may not exceed 5% of the
total number of the diluted ordinary shares of the Company at the date of issue and carry no dividend or voting
rights.
Options are not transferable and lapse following the resignation of employees before vesting date. The terms
and conditions of the options are that all options are to be settled by the physical delivery of shares.
The vesting conditions attached to the options are set out in the Remuneration Report (18A) of the Directors’
Report.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |67
NOTES ON THE FINANCIAL STATEMENTS
26.
Share Based Payments (Continued)
The number and weighted average exercise prices of share options are as follows:
Grant
date
Vesting
date
Expiry
date
Exercise
Price
$
Number
beginning
of year
Granted
Forfeited
Exercised
Number
at end
of year
2013
Options granted to management
14/12/2010
31/08/2012
30/09/2014
14/12/2010
31/08/2013
30/09/2014
14/12/2010
31/08/2014
30/09/2014
30/11/2011
1/09/2014
30/09/2015
29/05/2012
1/09/2014
31/08/2016
03/05/2013
1/09/2014
31/08/2016
0.57
0.57
0.57
0.35
0.40
0.55
448,346
448,327
448,327
500,000
‐
‐
‐
‐
2,374,000
*386,000
‐
688,600
(272,334)
(15,734)
160,278
(355,265)
(355,265)
(500,000)
(804,000)
(110,000)
‐
‐
‐
‐
‐
93,062
93,062
‐
1,956,000
578,600
Total
4,219,000
1,074,600
(2,396,864)
(15,734)
2,881,002
Weighted average exercise price
0.45
0.50
0.47
0.57
0.45
* Options granted 8 August 2012 and 22 August 2012 on the same terms as options issued in May 2012.
2012
Options granted to management
21/05/2008 30/08/2011
29/02/2012
12/01/2010
1/09/2011
30/09/2013
12/01/2010
1/09/2012
30/09/2013
12/01/2010
1/09/2013
30/09/2013
14/12/2010 31/08/2012
30/09/2014
14/12/2010 31/08/2013
30/09/2014
14/12/2010 31/08/2014
30/09/2014
30/11/2011
1/09/2014
30/09/2015
29/05/2012
1/09/2014
31/08/2016
Total
Weighted average exercise price
1.32
0.88
0.88
0.88
0.57
0.57
0.57
0.35
0.40
416,500
748,661
748,655
748,646
807,356
807,322
807,322
‐
‐
‐
‐
‐
‐
‐
‐
‐
500,000
2,374,000
(416,500)
(748,661)
(748,655)
(748,646)
(359,010)
(358,995)
(358,995)
‐
‐
5,084,462
2,874,000
(3,739,462)
0.77
0.39
0.84
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
448,346
448,327
448,327
500,000
2,374,000
4,219,000
0.45
The weighted average remaining contractual life of share options outstanding at the end of the period was 2.87
years (2012 – 1.57 years).
The fair values at grant date for non market options (EBITA & EPS vesting conditions) were estimated using a
Trinomial Lattice model which defines the conditions under which employees are expected to exercise their
options after vesting in terms of the stock price reaching a specified multiple of the exercise price.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |68
NOTES ON THE FINANCIAL STATEMENTS
26.
Share Based Payments (Continued)
The fair values at grant date for market options (TSR vesting condition) were estimated using a Monte Carlo
simulation and a trinomial tree (Hoadley’s Hybrid Employee Share Option model ‐ outperform index).
The model inputs for options granted during the 2013, 2012 and 2011 financial years included:
Options with
TSR hurdles
Dec
2010
Options without TSR hurdles
Dec
2010
Nov
2012
May
2012
May
2013
Fair value of share options at grant date:
Options vesting 1/09/2012
Options vesting 1/09/2013
Options vesting 31/08/2012
Options vesting 31/08/2013
Options vesting 31/08/2014
Options vesting 1/09/2014
Options vesting 1/09/2014
Options vesting 1/09/2014
Assumptions:
Share price
Exercise price
Expected volatility (weighted
average volatility)
‐
‐
$0.196
$0.193
$0.193
‐
‐
‐
$0.57
$0.57
70%
‐
‐
$0.24
$0.25
$0.24
‐
‐
‐
$0.57
$0.57
70%
‐
‐
‐
‐
‐
$0.119
‐
‐
$0.40
$0.40
50%
‐
‐
‐
‐
‐
‐
$0.118
‐
‐
‐
‐
‐
‐
‐
‐
$0.199
$0.38
$0.35
50%
$0.595
$0.55
50%
Option weighted average life
3.8 years
3.8 years
3.8 years
4.3 years
3.3 years
Expected dividends
5%
5%
6%
6%
Risk‐free interest rate (based on
government bonds)
5.31%
5.31%
2.60%
3.26%
3.5%
2.5%
The expected price volatility is based on the historic volatility compared to that of similar listed companies and
the remaining life of the options. This has been adjusted to take into consideration the recent extreme market
movements using a mean reversion tendency of volatilities (the concept of volatility returning to normal levels
after going to an extreme).
Employee Expenses
Share‐based payment expense recognised during the financial year
Options issued under employee option plan
Consolidated
2013
$’000
2012
$’000
(29)
(29)
108
108
27.
Contingent liabilities and contingent assets
There are no contingent liabilities or contingent assets that require disclosure in the financial report.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |69
NOTES ON THE FINANCIAL STATEMENTS
28.
Parent Entity Disclosures
As at and throughout the financial year ending 30 June 2013 the parent entity of the Group was
RungePincockMinarco Limited.
Summary financial information
The individual financial statements for the parent entity show the following aggregation:
Result of parent entity
Profit/(loss)
Other comprehensive income
Total comprehensive income
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Issued capital
Employee Option Reserve
Asset Revaluation Reserve
Reserve Arising From an Equity Transaction
Retained profits
Total equity
Contingent liabilities
Contractual commitments for the acquisition or property, plant or equipment
2013
$'000
2012
$'000
(386)
‐
(386)
22,870
68,870
16,666
20,359
4,204
‐
4,204
28,485
73,138
22,403
30,976
48,664
39,418
697
18
(600)
(268)
48,511
‐
‐
726
18
(600)
2,600
42,162
‐
‐
The parent entity has provided guarantees to third parties in relation to the performance and obligations of its
subsidiary, GeoGAS Pty Ltd in respect of property lease rentals. The guarantees are for the terms of the leases
and total $98,000 (2012: $134,000). The periods covered by the guarantees range from three to four years.
No deficiency of net assets existed in the controlled entities covered by guarantees at 30 June 2013 or 30 June
2012. No liability was recognised by the parent entity in relation to these guarantees, as the fair value of the
guarantee is immaterial.
29.
Events occurring after the reporting period
No matter or circumstance has arisen since 30 June 2013 that has significantly affected, or may significantly
affect:
a) The Group’s operations in future financial years; or
b) The results of those operations in future financial years; or
c) The Group’s state of affairs in future financial years.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |70
DIREC
TORS’
DECLA
N
ARATION
In the direct
n:
tors' opinion
inancial stat
sued by the
ments;
inancial stat
al position as
•
•
•
•
•
the
Acc
req
the
Stan
fina
the
ent
dat
the
Rem
Act
the
the
attached f
counting Stan
uirements;
attached fi
ndards as iss
ancial statem
attached fi
ity's financia
e;
remunerati
muneration R
2001; and
re are reaso
y become du
inancial stat
ndards, the
tements and
Corporations
d notes the
s Regulation
ereto comply
ns 2001 and
y with the
other mand
Corporation
datory profes
s Act 2001,
ssional repo
, the
rting
tements and
Internationa
d notes ther
al Accountin
reto comply
ng Standards
y with Intern
s Board as de
national Fin
escribed in n
ancial Repo
note 1 (a) to
rting
o the
tements and
s at 30 June
d notes ther
2013 and of
reto give a
its performa
true and fa
ance for the
air view of t
financial ye
the consolid
ar ended on
ated
that
ion disclosur
Report), for
res included
the year end
d in pages 22
ded 30 June
2 to 29 of t
2013, comp
he directors
ly with secti
s’ report (as
ion 300A of t
s part of aud
the Corporat
dited
tions
onable groun
ue and payab
nds to believ
ble.
ve that the
company wi
ll be able to
o pay its deb
bts as and w
when
The directo
rs have been
n given the d
declarations
required by
section 295A
A of the Corp
porations Ac
t 2001.
ith a resolut
ion of direct
tors
Signed in ac
ccordance w
Allan Bracki
Chairman
in,
Brisbane
Dated this 2
22 day of Aug
gust 2013
RUNGEPINCOC
R
KMINARCO LIM
MITED // ANNUAL
L REPORT 2013
|71
Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Level 10, 12 Creek St
Brisbane QLD 4000
GPO Box 457 Brisbane QLD 4001
Australia
INDEPENDENT AUDITOR’S REPORT
To the members of RungePincockMinarco Limited
Report on the Financial Report
We have audited the accompanying financial report of RungePincockMinarco Limited, which comprises the
consolidated statement of financial position as at 30 June 2013, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity and the consolidated statement of
cash flows for the year then ended, notes comprising a summary of significant accounting policies and other
explanatory information, and the directors’ declaration of the consolidated entity comprising the company
and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1,
the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit
in accordance with Australian Auditing Standards. Those standards require that we comply with relevant
ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable
assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the
risks of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the company’s preparation of the financial
report that gives a true and fair view in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation
of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
BDO Audit Pty Ltd ABN 33 134 02 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by
guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member
firms.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |72
Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Level 10, 12 Creek St
Brisbane QLD 4000
GPO Box 457 Brisbane QLD 4001
Australia
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of RungePincockMinarco Limited, would be in the same terms if given to the directors as at the
time of this auditor’s report.
Opinion
In our opinion:
(a) the financial report of RungePincockMinarco Limited is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 22 to 29 of the directors’ report for the year
ended 30 June 2013. The directors of the company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to
express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Opinion
In our opinion, the Remuneration Report of RungePincockMinarco Limited for the year ended 30 June 2013
complies with section 300A of the Corporations Act 2001.
BDO Audit Pty Ltd
A S Loots
Director
Brisbane, 22 August 2013
BDO Audit Pty Ltd ABN 33 134 02 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by
guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member
firms.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |73
CORPORATE GOVERNANCE STATEMENT
Corporate Governance Statement – Year Ended 30 June 2013
The Board and management consider that it is crucial to the Company’s economic, social and ethical objectives
that it adopts an appropriate corporate governance framework pursuant to which the Group will conduct its
operations in Australia and internationally with integrity and in a transparent and open manner.
This statement explains how the Group addresses the requirements of both the Corporations Act 2001, the ASX
Listing Rules 2001 and the ASX Corporate Governance Council’s ‘Corporate Governance Principles and
Recommendations ‐ 2nd Edition’ (hereafter referred to as either ASX Principles or Recommendations).
P R I N C I P L E 1 : – L A Y S O L I D F O U N D A T I O N S F O R M A N A G E M E N T A N D O V E R S I G H T
Recommendation 1.1: Companies should establish the functions reserved to the Board and those delegated
to the Executive Team
Role of the board
The Board is responsible for the governance of the Group. The role of the Board is to provide overall strategic
guidance and effective oversight of management. The Board derives its authority to act from the constitution of
the Company.
The responsibilities of the Board are set out in the Board Charter can be found on the Company’s website, at:
http://www.rpmglobal.com/investor‐relations/corporate‐governance
The Board Charter was adopted by the Board on 11 April 2008 and is reviewed to ensure it is operating
effectively and in the best interests of the Company.
As set out in more detail in the Board Charter, the key functions reserved to the Board are to:
a)
b)
c)
d)
e)
f)
g)
h)
i)
oversee the Company, including its control and accountability systems;
oversee the business and strategic direction of the Company in order to maximise performance and
generate appropriate levels of shareholder return;
appoint, evaluate and remove the Chairman, the Managing Director, any other Executive Director, the
Company Secretary, and where appropriate, senior executives;
review, ratify and monitor systems of internal controls, risk management, codes of conduct and legal
compliance;
provide input into and final approval of management’s development of corporate strategy and
performance objectives;
review the performance and implementation of corporate strategies by senior management and ensure
that senior management have the necessary resources to do so;
approve and monitor progress of major capital expenditure, capital management, acquisitions and
divestments;
approve and monitor annual budgets and strategic plans; and
approve and monitor financial and other reporting made to shareholders and the ASX under the
continuous disclosure regime.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |74
CORPORATE GOVERNANCE STATEMENT
P R I N C I P L E 1 : – L A Y S O L I D F O U N D A T I O N S F O R M A N A G E M E N T A N D O V E R S I G H T
( C O N T I N U E D )
The Board delegates specific responsibilities to various Board Committees. For the 2013 Financial Year, the
Board utilised the following Committees:
•
•
•
An Audit and Risk Committee, which is among other things responsible for overseeing the external and
internal auditing functions of the Company’s activities;
An Human Resources and Remuneration Committee, which is responsible for making recommendations
to the Board on remuneration packages for executives, senior managers, Non‐executive Directors and
overseeing the Human Resources policies of the Company; and
A Nominations Committee, which is responsible for making recommendations to the Board on the
composition of the Board and appointment and evaluation of the Managing Director.
The Charter of each of the above listed Committees can be found on the Company’s website, at:
http://www.rpmglobal.com/investor‐relations/corporate‐governance
Timetables for Board and Committee meetings are agreed by the Board annually in advance.
Delegations to the CEP and the Executive Management Team
The Board are able to delegate any of the power and authorities exercisable by the Board to one director by
virtue of the Company’s constitution.
The Board delegates certain powers and authorities to the CEO as Managing Director, and in turn to designated
management personnel of the Company, to implement the strategic direction set by the Board and for
managing the Group’s day‐to‐day operations. This delegation is detailed in a Delegation of Execution, Financial
& Negotiation Authority Policy. The Policy:
•
•
•
defines the delegations of authority for the negotiation, approval & execution of sales and other
agreements on behalf of the Company;
defines the delegations of authority for entering into of financial obligations and authorisation of
expenditure on behalf of the Company; and
provides guidelines on the circumstances and requirements on delegates when exercising those
delegations including for sub‐delegation.
This Policy is reviewed by the Board on a periodic basis to ensure appropriate levels of control and management
of risk are retained by the Board and was last updated on 21 August 2013.
Appointment of Directors and Executives and Responsibilities
The Directors are engaged under and Executives are employed under Service Agreements which set out the
terms on which the individuals are appointed including details of duties, responsibilities, rights, and
remuneration entitlements.
Recommendation 1.2: Companies should disclose the process for evaluating the performance of Senior
Executives
The performance of the CEO has been assessed for the 2013 financial year in accordance with the process
adopted by the Board. The CEO presented an annual self‐assessment to the Chairman of the Board. The
assessment for the 2013 financial year was in accordance with the performance criteria set out in the Managing
Director’s employment contract including evolution and execution of strategy, meeting operational and
financial targets. The Chairman presented the assessment to the Board for its comment.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |75
CORPORATE GOVERNANCE STATEMENT
P R I N C I P L E 1 : – L A Y S O L I D F O U N D A T I O N S F O R M A N A G E M E N T A N D O V E R S I G H T
( C O N T I N U E D )
Due to the new appointments and changes to the executive management team during the past year,
performance reviews are currently underway and are scheduled to be completed during the first quarter of
2014.
The reviews are being completed in accordance with the process adopted by the Board on recommendation by
the HR and Remuneration Committee. Both qualitative and quantitative measures will be unitised consistent
with KPOs set by the CEO in consultation with the key executives. The CEO will report to the Human Resources
and Remuneration Committee the performance of these key executives. The Human Resources and
Remuneration Committee will then approve any changes to remuneration and to the establishment of new
KPOs for the 2014 financial year.
P R I N C I P L E 2 : ‐ S T R U C T U R E T H E B O A R D T O A D D V A L U E
The Company’s constitution provides for a minimum of 3 directors and a maximum of 8 unless the Company in
general meeting determines otherwise.
During the 2013 Financial Year Mr Christian Larsen resigned as a non‐executive director. The Board has elected
not to replace his position on the Board at this time. The Board is of the view that the current size, capabilities
and composition of the Board being limited to four (4) directors is appropriate and conducive to decision
making for the current operations. The Board will consider appointment of another independent director with
the appropriate skills and experience to add value to the Board when appropriate and required to support the
Company’s operations.
Recommendation 2.1: A majority of the board should be independent directors
The names of the Directors of the Company in office at the date of this report, specifying which are
independent, are set out below. The skills, experience and expertise relevant to the position of director held by
each director below is set out in Section 9of the Annual Report in the section entitled “Information on Current
Directors and Company Secretary”.
Current Board Composition
Director
Board membership
Date of appointment
A Brackin
Independent Chairman
November 2011
R Mathews
Executive, Managing Director and CEO
February 2012 (August 2012 in Executive capacity)
Dr I Runge
Non‐executive
R Walker
Independent
December 1986
March 2007
The Board is committed to ensuring that there will be at least four Directors of whom a majority will be Non‐
executive Directors and as far as possible, at least two will be independent Directors.
A Director is regarded as independent if that Director is a Non‐executive Director who is not a member of
management and who is free of any business or other relationship that could materially interfere with, or could
reasonably be perceived to materially interfere with, the independent exercise of their judgement. When
determining the independent status of a Director, the Board has considered whether the Director:
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |76
CORPORATE GOVERNANCE STATEMENT
P R I N C I P L E 2 : ‐ S T R U C T U R E T H E B O A R D T O A D D V A L U E ( C O N T I N U E D )
a)
is a substantial shareholder of the Company or an officer of, or otherwise associated directly with a
substantial shareholder of the Company;
b) within the last three years has been employed or has previously been employed in an executive capacity by
the Company or another group member;
c) within the last three years has been a principal of a material professional adviser or a material consultant to
the Company or another Group member, or an employee materially associated with the service provided;
d) is a material supplier or customer of the Company or other Group member, or an officer of or otherwise
associated directly or indirectly with a material supplier or customer;
e) has a material contractual relationship with the Company or another Group member other than as a
Director of the Company.
The Board has determined, on an individual by individual basis, that each of the two Directors designated as
independent Directors above satisfy all of the above criteria. In addition, the Board comprises a majority of
Non‐executive Directors and one Executive Director.
The Board presently does not comprise a majority of Independent Directors, but the Board believes that the
current individuals on the Board are able to make quality and independent judgements in the best interests of
the Company on all relevant issues. The Company may consider appointing an additional Independent Director
if and when the scale of its operations justifies such an appointment and an appropriate candidate becomes
available. The criteria used to assess independence are reviewed from time to time.
The Non‐executive Directors understand the benefits of conferring regularly without management present, and
do so.
The Board is also committed to ensuring that all Directors, whether independent or not, bring an independent
judgment to bear on Board decisions. To facilitate this, the Board has agreed on a procedure for Directors to
have access, in appropriate circumstances, to independent professional advice at the Company’s expense.
Recommendation 2.2: The Chair should be an independent Director
It is a requirement of the Company’s Board Charter that the Chair should be an independent director.
The Board is satisfied that the Company’s Chairman, Allan Brackin, is, and has been throughout the year, an
independent Director.
Recommendation 2.3: The roles of the chair and chief executive officer should not be exercised by the same
individual
The Chairman and the CEO roles are performed by different persons.
Recommendation 2.4: The Board should establish a nomination committee
The Board is committed to ensuring that its members have a broad range of skills, experience and expertise.
This will assist the Board to maximise performance and ensure appropriate levels of shareholder return.
The Board has, in accordance with ASX Recommendation 2.4 and as stated above, established a Nominations
Committee. The primary purpose of the Nominations Committee is to assist the Board to discharge its
responsibilities with regard to the following areas:
•
•
•
overseeing the composition of the Board and competencies of Board members;
providing recommendations of appointment and evaluation of the Managing Director;
ensuring that appropriate procedures exist to assess the performance levels of the Chairman, Non‐
executive Directors, Executive Directors; and
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |77
CORPORATE GOVERNANCE STATEMENT
P R I N C I P L E 2 : ‐ S T R U C T U R E T H E B O A R D T O A D D V A L U E ( C O N T I N U E D )
•
developing succession plans for the Board and overseeing development by management of succession
planning for senior executives.
The Nominations
http://www.rpmglobal.com/docs/corporate‐governance‐docs/rpm‐nominations‐committee‐charter‐(adopted‐
11‐04‐08).pdf?sfvrsn=4
Company’s website,
Committee
Charter
found
can
the
on
be
at:
The Charter requires that a majority of members of the Nominations Committee must, as far as possible, be
independent Non‐executive Directors. The Chairman of the Nominations Committee is an independent
Director.
The current members of the Nominations Committee are the entire Board, so the Committee is not comprised
of a majority of independent Directors.
The Board is of the view that the entire Board brings the appropriate mix of skills and experience to satisfy the
responsibilities under the Committee’s Charter. For that reason the duties of the Nominations Committee are
currently being carried out by the entire Board and as such separate meetings for the Nomination Committee
have not occurred during the 2013 Financial Year.
The skills, experience and length of appointment relevant to each Director are set out in Section 9 of the
Directors’ Report in the section entitled “Information on Current Directors and Company Secretary”.
The name of the Director considered to be independent and the materiality thresholds are set out in this
Statement under Recommendation 2.1. The relevant transactions with the independent Director, Ross Walker
are set out in note 20 (fee) of the financial statements. The Board considers that the transactions involving Ross
Walker are not material.
A record of all Board and Committee meetings held and the attendance of each Director at those meetings are
set out in the Directors’ Report.
Recommendation 2.5: The performance of the board should be reviewed regularly against appropriate
measures
It is the responsibility of the Board and its Committees to review their performance (group and individually)
annually to ensure that they are operating effectively and in the best interests of the Company.
A comprehensive internal review of the Board and its Committees was completed in 2012. With the change in
board personnel during 2013 a review was not completed during the year however is scheduled to be
undertaken during 2014.
The Company Secretary monitors whether Board policy and procedures are being followed, and co‐ordinates
timely completion and despatch of Board agenda and briefing material.
P R I N C I P L E 3 : P R O M O T E E T H I C A L A N D R E S P O N S I B L E D E C I S I O N ‐ M A K I N G
The Board fully supports a strong commitment to ethical and responsible decision‐making.
Recommendation 3.1: Companies should establish a code of conduct
The Company has established a Code of Conduct Policy setting out the standards of ethics and conduct to which
all Group Directors, executives and employees must adhere whilst conducting their duties. The Code of
Conduct Policy can be found on the Company’s website, at: http://www.rpmglobal.com/docs/corporate‐
governance‐docs/rpm‐code‐of‐conduct‐(adopted‐11‐04‐08).pdf?sfvrsn=4
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |78
CORPORATE GOVERNANCE STATEMENT
P R I N C I P L E 3 : ‐ P R O M O T E E T H I C A L A N D R E S P O N S I B L E D E C I S I O N ‐ M A K I N G ( C O N T I N U E D )
The Code of Conduct Policy sets out a number of overarching principles of ethical behaviour and, among other
things, requires the Directors, executives and employees of the Group to:
a) act with high standards of honesty, integrity, fairness and equity in all aspects of their employment;
b) comply fully with the content and spirit of all laws and regulations which govern its operations, its business
environment and its employment practices;
c) not directly or indirectly offer, pay, solicit or accept bribes, secret commissions or other similar payments or
benefits in the course of conducting business;
d) not divulge any information about the Company without appropriate authorisation;
e) not participate in insider trading by using knowledge not generally available to the market to gain unfair
advantage in the buying or selling of the Company’s securities;
f) not knowingly participate in any illegal or unethical activity; and
g) not enter into any arrangement or participate in any activity that would conflict with the interests of the
Company or prejudice the performance of professional duties.
The Managing Director in conjunction with the EGM Human Resources ensures that all employees are made
aware of all procedures and policies on induction and on an ongoing basis to ensure any necessary reporting
steps are undertaken.
The Company is committed to ensuring that employees may raise concerns regarding illegal conduct or
unethical behaviour and will support employees who report violations in good faith. All reports received will be
thoroughly investigated and any necessary action taken.
Internal audits will be undertaken to ensure compliance.
Recommendation 3.2: Companies should establish a policy concerning diversity
In May 2012, the Board adopted a Diversity Policy to describe how the Company is committed to a diverse
workforce that recognises and embraces the value that different people can bring to an organisation. The
Company promotes a diverse workplace by aiming to ensure that all employees and applicants for employment
are fairly considered according to their skills, qualifications and abilities.
The Policy can be found on the Company’s website, at: http://www.rpmglobal.com/docs/corporate‐
governance‐docs/rpm‐diversity‐policy‐(adopted‐29‐05‐12).pdf?sfvrsn=4
The Diversity Policy reflects the Company’s commitment to a diverse workforce that recognises and embraces
the value that different people can bring to an organisation. The Company promotes a diverse workplace by
aiming to ensure that all employees and applicants for employment are fairly considered according to their
skills, qualifications and abilities.
The Policy sets out the roles and responsibilities of the Board, the Human Resources and Remuneration
Committee, and the Company’s employees in relation to workplace diversity. The initiatives which have been
adopted by the Company to assist with improving gender diversity are also set out within the Policy.
Recommendation 3.3: Companies should disclose the measurable objectives for achieving gender diversity
and progress towards achieving those objectives
The Company’s measurable objective set in 2012 was to have 35% of women across the whole organisation by
June 2013, subject to the overriding objective that all appointments will be made on the basis of merit.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |79
CORPORATE GOVERNANCE STATEMENT
P R I N C I P L E 3 : ‐ P R O M O T E E T H I C A L A N D R E S P O N S I B L E D E C I S I O N ‐ M A K I N G ( C O N T I N U E D )
Progress
As at 30 June 2013, 29% of the company’s employees were women. This is a 3% decrease on June 2012. In part
this reduction is due to the reduction in total employee headcount from 474 at 30 June 2012 to 341 at 30 June
2013.
The female to male ratio, for employees in management positions in the Company, increased by 20% over the
same period.
The Company remains committed to achieving its measurable objective set in 2012 however due to current
market conditions this objective is likely to be achieved over a longer period. The Board will assess the target
and progress against the target during the 2014 financial year.
Recommendation 3.4: Companies should disclose proportion of women employees in the Company, in senior
executive positions and on the Board
Donna Williams was appointed to the Company’s senior executive team in the role of Executive General
Manager – Human Resources effective 1 October 2012. Currently there are no females appointed to the Board.
Female Directors on the Board
Female Employees in Senior Executive Positions
Female Employees in Management Positions
Female Employees in the Group
2013
2012
No.
‐
1
21
99
%
‐
20%
43%
29%
No.
‐
‐
16
154
%
‐
‐
23%
32%
P R I N C I P L E 4 : S A F E G U A R D I N T E G R I T Y I N F I N A N C I A L R E P O R T I N G
Recommendation 4.1: The Board should establish an Audit Committee
The Board has established an Audit and Risk Committee.
The primary purpose of the Audit and Risk Committee is to assist the Board to discharge its responsibilities with
regard to:
•
•
monitoring and reviewing the effectiveness of the control environment in the Group in the areas of
operational and balance sheet risk, legal/regulatory compliance and financial reporting; and
providing an independent and objective review of financial and other information prepared by
management, in particular that to be provided to members and/or filed with regulators.
Further, the Audit and Risk Committee leads the review of the performance of the external auditors, and sets
the procedures for both the selection and appointment of external auditors and the rotation of external audit
engagement partners.
Recommendation 4.2: The Audit Committee should be appropriately structured
The Committee consists of two Non‐executive Directors, one of whom is independent, and the Chief Financial
Officer. The Committee Chair is not the Chairman of the Board. The current composition of the Audit and Risk
Committee is:
Mr Ross Walker
Committee Chair (Non‐executive and independent)
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |80
CORPORATE GOVERNANCE STATEMENT
P R I N C I P L E 4 : S A F E G U A R D I N T E G R I T Y I N F I N A N C I A L R E P O R T I N G ( C O N T I N U E D )
Dr Ian Runge
Member (Non‐executive)
Mr Michael Kochanowski Chief Financial Officer
Each Director has an appropriate knowledge of the Company’s affairs and has the financial and business
expertise to enable the Committee to discharge its mandate effectively. The qualifications of each Director of
the Audit and Risk Committee are set out in Section 9, of the Annual Report in the section entitled “Information
on Current Directors and Company Secretary”.
The members of the Committee have direct access to employees, external auditors and financial and legal
advisers without management present.
Recommendation 4.3: The Audit Committee should have a formal charter
The Audit and Risk Committee’s formal Charter, which complies with ASX Principles, can be found on the
Company’s website,
http://www.rpmglobal.com/docs/corporate‐governance‐docs/rpm‐audit‐risk‐
at:
committee‐charter‐(adopted‐14‐12‐11).pdf?sfvrsn=4
The Committee meets as often as required. Attendance at Audit and Risk Committee meetings is set out in the
Directors’ Report.
The Company Secretary is the secretary of the Committee. The Audit and Risk Committee keeps minutes of its
meetings and includes them for the next full Board Meeting.
The Company does not publish on its website the procedures for the selection and appointment of external
auditors, and for the rotation of external audit engagement partners. The Company has had no need to
formalise these procedures at this stage although it recognises the potential benefits to developing such
procedures should the size and/or operations of the Group require that to occur.
P R I N C I P L E 5 : M A K E T I M E L Y A N D B A L A N C E D D I S C L O S U R E
Recommendation 5.1: Companies should promote timely and balanced disclosure of all material matters
concerning the company
The Board supports continuous disclosure consistent with ASX Principles. The Company’s Board approved a
Continuous Disclosure Policy and Market Disclosure Guidelines which are designed to ensure that:
•
•
shareholders have equal and timely access to material information concerning the Company; and
Company announcements are clear, concise, factual and balanced.
A copy of the Continuous Disclosure Policy and market Disclosure Guidelines can be found on the Company’s
website, at: http://www.rpmglobal.com/docs/corporate‐governance‐docs/rpm‐continuous‐disclosure‐policy‐
market‐disclosure‐guidelines‐(adopted‐30‐10‐08).pdf?sfvrsn=4
The Board has overall responsibility for ensuring compliance with the Continuous Disclosure Policy and Market
Disclosure Guidelines. The Board has established a Disclosure Committee, currently consisting of the Chairman,
the Managing Director, and the Company Secretary, to assist the Board in ensuring compliance with the
Continuous Disclosure Policy and Market Disclosure Guidelines. The Disclosure Committee in turn appoints
reporting officers, and those officers are required to:
•
•
immediately disclosure any material information which may need to be disclosed under Listing Rule 3.1;
and
ensure awareness of and compliance with the Continuous Disclosure Policy and Market Disclosure
Guidelines.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |81
CORPORATE GOVERNANCE STATEMENT
P R I N C I P L E 5 : M A K E T I M E L Y A N D B A L A N C E D D I S C L O S U R E ( C O N T I N U E D )
The Company Secretary reports to the Board at each Board meeting as to the matters that were notified to the
ASX. Directors receive copies of all announcements immediately after notification to the ASX. All ASX
announcements are also made available on the company website.
P R I N C I P L E 6 : R E S P E C T T H E R I G H T S O F S H A R E H O L D E R S
Recommendation 6.1: Companies should design a communications policy for promoting effective
communication with shareholders
Shareholder communication is conducted in accordance with the Company’s Continuous Disclosure Policy and
the Company’s Shareholder Communications Policy. Both policies can be found on the Company’s website, at:
http://www.rpmglobal.com/docs/corporate‐governance‐docs/rpm‐shareholder‐communication‐policy‐
(adopted‐11‐04‐08)‐pdf.pdf?sfvrsn=4
Releases made to the ASX are posted on the Company’s website. The Company’s website also contains general
information regarding the Company and its activities, notices of future meetings, announcements, half yearly
and annual reports and the Chairman’s Annual General Meeting addresses since listing.
Shareholders are encouraged to attend and actively participate at General Meetings. The Company’s Directors
and the Chairmen of all Committees plus senior management will be present at each Annual General Meeting to
answer shareholder questions. The Company’s auditor is also present at each Annual General Meeting to
answer any shareholder questions.
The Company has established a Securities Trading Policy in respect of trading in Company shares by the Group’s
Directors, executives and employees.
The Policy can be found on the Company’s website, at:
http://www.rpmglobal.com/docs/corporate‐governance‐docs/rpm‐securities‐trading‐policy‐(adopted‐13‐08‐
11).pdf?sfvrsn=4
P R I N C I P L E 7 : R E C O G N I S E A N D M A N A G E R I S K
Recommendation 7.1: Companies should establish policies for the oversight and management of material
business risks
The Board understands the importance of maintaining a sound and practical system of risk oversight and
management and internal control.
The Group faces a wide variety of risks due to the nature of its operations and the regions in which it operates
including commercial risks, legal risks, compliance risks and financial risks. The Group has a number policies
adopted by the Board that directly or indirectly serve to reduce and/or manage risk. These include, but are not
limited to:
•
•
•
•
Delegations of Authority policy;
Workplace Health and Safety policies;
Code of Conduct policies;
Securities Trading Policy.
The Board maintains oversight on risk and operational, financial and legal reports are provided to the Board at
each meeting to highlight and address areas of risk and concern.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |82
CORPORATE GOVERNANCE STATEMENT
P R I N C I P L E 7 : R E C O G N I S E A N D M A N A G E R I S K ( C O N T I N U E D )
Recommendation 7.2: The Board should require management to design and implement the risk management
and internal control systems to manage key risks
The Board adopted an Enterprise Risk Management Policy and Manual (“ERM Policy”) reflecting the Group’s risk
profile on 27 September 2011, describing the elements of the Group’s risk management and internal control
system and setting out the steps to be taken to manage the Group’s material business risks. The ERM Policy
was prepared and based on the principles of International Standard ISO 31000: 2009 Risk Management –
Principles and Guidelines.
To ensure the ERM Policy remains an effective governance document applied practically throughout the
Company, the policy is currently under review by the Executive management team to ensure it is up‐to‐date and
that it can be practically implemented by the Company. Any findings from this review requiring amendments or
improvements to the policy will, where appropriate, be recommended to the Board for consideration.
Recommendation 7.3: The Board should disclose whether it has received assurance from the CEO and CFO
under s 295A of the Corporations Act 2001
The Board has received declarations from the Managing Director and the CFO pursuant to s295A of the
Corporations Act which state that the financial statements are founded on sound risk management and internal
controls and that the system is operating effectively in all material respects in relation to financial reporting
risks.
P R I N C I P L E 8 : R E M U N E R A T E F A I R L Y A N D R E S P O N S I B L Y
Recommendation 8.1: The Board should establish a Human Resources and Remuneration Committee
The Company has established a Human Resources and Remuneration Committee (“HR and Remuneration
Committee”) to assist the Board in establishing appropriate remuneration levels for the Group’s employees.
The HR and Remuneration Committee, among other things:
•
•
•
•
assists the Board in setting remuneration, recruitment, retention, development and termination policies
for senior executives;
recommends to the Board remuneration packages for Executive Directors;
recommends to the Board a remuneration framework for Directors and all employees in the Group; and
recommends to the Board appropriate superannuation arrangements.
A copy of the HR and Remuneration Committee Charter can be found on the Company’s website at:
http://www.rpmglobal.com/docs/corporate‐governance‐docs/rpm‐human‐resources‐and‐remuneration‐
committee‐charter‐(adopted‐11‐10‐12).pdf?sfvrsn=4
Recommendation 8.2: The Committee should be structured appropriately
The Committee is comprised of four Directors, three of whom are independent, and the Executive General
Manager of Talent and Organisational Development. The Chairman of the Committee is an independent
Director. The current composition of the Committee is as follows:
Mr Allan Brackin
Board & Committee Chairman (independent)
Mr Richard Mathews Managing Director
Mr Ross Walker
Director (independent)
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |83
CORPORATE GOVERNANCE STATEMENT
P R I N C I P L E 8 : R E M U N E R A T E F A I R L Y A N D R E S P O N S I B L Y ( C O N T I N U E D )
Recommendation 8.3: The Company should distinguish between non‐executive Directors remuneration and
that of executive Directors and management
The Company clearly distinguishes the structure of Non‐executive Director remuneration from that of Executive
Directors and senior executives.
Non‐executive Directors are paid a set fee as agreed by the Board annually, and do not receive performance
based fees or retirement benefits. The remuneration of Non‐executive Directors is not more than the
aggregate fixed sum determined by the Company’s shareholders in a general meeting.
The remuneration structure for Executive Directors and senior executives is balanced between fixed salary and
incentive schemes that are designed to align as closely as possible with the Company’s short term and long term
objectives.
The Remuneration Report provides a detailed disclosure of Non‐executive Directors, Executive Directors and
senior Executives in accordance with reporting obligations.
The Directors’ Report sets out the number of meetings of the HR and Remuneration Committee and attendance
at those meetings.
There is not any scheme for retirement benefits, other than superannuation, for Non‐executive Directors.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |84
SHAREHOLDER INFORMATION
The shareholder information set out below was applicable as at 1 August 2013.
A.
Distribution of Equity Securities
Analysis of number of equity security holders by size of holding:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Ordinary Shares
95
Options
‐
279
169
327
96
966
2
5
33
11
51
The number of shareholdings held in less than marketable parcels of 981 shares is 78.
B.
Equity Security Holders
Twenty largest quoted security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
RUNGE INTERNATIONAL PTY LTD
NATIONAL NOMINEES LIMITED
KINNANE ASSET MANAGEMENT PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
PAUA PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
MR IAN DESMOND PERKS
MR DAVID BRIAN MELDRUM
EQUITY TRUSTEES LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMS PTY LTD
UBS NOMINEES PTY LTD
MICROEQUITIES ASSET MANAGEMENT PTY LTD
UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD
MR STEPHEN JOHN BALDWIN & MRS ANDREA MAREE BALDWIN
MR KEITH MCARLEY
ANAJAM PTY LTD
EQUITAS NOMINEES PTY LIMITED
MR JOHN FRANCIS BUFFINGTON
MS TRACY ANNE ROWLANDS
Number held
15,810,389
14,600,346
Percentage of
issued shares
11.19
10.33
8,734,983
6,656,318
6,512,003
5,193,201
4,129,685
3,877,811
3,862,771
3,607,839
3,466,929
3,381,577
2,766,091
2,703,421
2,642,511
2,483,497
1,815,099
1,339,730
1,334,792
1,245,889
6.18
4.71
4.61
3.67
2.92
2.74
2.73
2.55
2.45
2.39
1.96
1.91
1.87
1.76
1.28
0.95
0.94
0.88
Unquoted equity securities
2,881,002 options over unissued shares: for further details see note 26.
96,164,882
68.04
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |85
SHAREHOLDER INFORMATION
C.
Substantial Holders
The names of the substantial shareholders listed in the holding register are:
Runge International Pty Ltd atf Runge Family A/C
IOOF Holdings Limited
Mrs P Kinnane
D.
Voting Rights
Refer to note 17 for voting rights attached to ordinary shares.
Number held
Percentage
16,310,484
14,001,050
9,621,169
11.54
9.91
6.81
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2013 |86
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Level 1
P: +61
12, 333 Ann S
1 7 3100 720
St, Brisbane
00 F: +61 7 3
QLD 4000
100 7297
www.rpm
w
mglobal.c
com