ANNUAL REPORT
2014
CONTENTS
Chairman’s Report ……………………………………………………………………………………………………………………..
Managing Director’s Report ……………………………………………………………………………………….………………
Board of Directors …………………………………………….………………………..………………………………………..……
Executive General Managers ………………………………………………………………………………………………………
Corporate Directory ……………………………………………………………………………………………….…………….….…
1
3
6
7
9
Directors' Report …………………………………………………………………………………………..…………………..…….… 10
Auditor’s Independence declaration………………………………………………………..…………………………………. 26
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 ……………………………………………………………………………………………………………
27
29
30
31
32
68
69
71
83
CHAIRMAN’S REPORT
Dear Fellow Shareholders,
The past twelve months have again been
challenging for the industry in which the
Company operates, particularly in its Advisory
and GeoGAS divisions.
The recent mining boom has seen a significant
increase in the supply of resources from both
new mines and extensions to existing mines.
The current situation involves increases in
supply outstripping
in demand,
resulting in substantial downward pressure on
commodity prices. The overriding imperative
for mining companies continues to be to
reduce their cost of mining as quickly as
possible.
increases
In Australia, the competitiveness of many
mines has been seriously eroded due to
relations practices,
demanding
compliance costs, previously negotiated ‘take
or pay’ transportation arrangements and the
high value of the Australian dollar.
industrial
The significant pull back
in new capital
investments by the major mining companies
has continued throughout 2013 and 2014 and
the low levels of coal exploration currently
being undertaken are adversely affecting the
GeoGAS division. The Junior miners remain
bunkered down and are focused on cash
preservation
exploration
investment.
rather
than
The Company, like most contributors to the
industry, has been negatively impacted by this
sharp contraction in industry investment. The
Company’s Advisory division, GeoGAS division
and desktop Software sales have all seen a
reduction in demand. Not only has absolute
demand dropped but pricing competition has
intensified which is driving down both prices
and margins.
In last year’s Report, I assured shareholders
that we would continue to closely monitor the
industry changes and
if needed respond
swiftly and decisively, which we have. As we
did last year, we have reduced the ongoing
operational costs of the business, particularly
in the Advisory and GeoGAS divisions. We
have also kept the lid firmly fastened in
relation to capital expenditure.
result of
amortisation,
As a
restructuring activities
undertaken by Richard and his management
team, operating expenditure
(expenses
depreciation,
excluding
restructure and impairment) in 2014 is down
15%, or $10.7 million, on the prior year. As
the majority of Company costs are employee
related, this down-sizing cost the Company
$1.0 million in redundancy and $0.5 million in
other one-off restructuring expenditure. We
have also recognised a non-cash impairment
of $3.0 million to the Goodwill associated with
the Advisory division.
Right throughout this difficult process we
have ensured that the Company’s core
capabilities and capacity were retained. The
Board believes that the Company’s cost
structure is now appropriate for our current
revenue expectations but we will continue to
remain vigilant and monitor the
industry
situation closely.
invested
While we have reduced the operating costs of
the business, we have also
in
technology products. During the year we
released HAULSIM, which is a new desktop
simulation product, along with three more
Commodity Based Solutions (Open Pit Metals,
Open Pit Diamonds and Oil Sands). We also
released the Company’s second enterprise
product (XACT for Enterprise) which is fully
integrated with SAP’s suite of corporate
products.
These new products laid the foundation for
in software
the Company’s 44%
license sales in 2014 and significant increase
in the Company’s software license pipeline
leading into 2015.
increase
In August 2014, the Company acquired a non-
exclusive right to the software code of the
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |1
CHAIRMAN’S REPORT
Mine 2-4D software design product from
MineRP. Under the terms of the acquisition
we have unrestricted rights to rebrand,
commercialise and exploit the software code
and any successor products. This acquisition
will enable us to develop mine design
products
integrated design
capability with the Company’s scheduling
products.
and offer
The Board is firmly of the opinion that these
investments, along with the products that will
be released in 2015, will provide the growth
engine for the business in 2015.
For the second year in a row, we are pleased
to report there has been good liquidity in the
Company’s shares.
Given demand for the stock, in August 2014
the Company executed an Institutional Share
Placement Scheme (SPS), placing 35,000,000
ordinary shares at $0.60 cents
(an 8%
discount to the then trading price) raising $21
the purpose of
for
million
accelerating the Group’s software strategy.
in capital
Institutional representation on the Company’s
share register has continued to climb and is
now greater than 50% of the total issued
capital of the Company. As a result of the SPS,
both Challenger/Greencape and Colonial
(Commonwealth Bank of Australia) became
substantial shareholders and we welcome
them to the register. The Company is also
undertaking a Share Purchase Plan (SPP) for
retail shareholders who are able to purchase
up to $15,000 of the Company’s stock on the
same terms as the institutional placement.
The Board has resolved not to pay a dividend
this financial year.
2014 has been another difficult year for
mining services providers but one in which we
have started to see the potential of our
software strategy. As a Board, we support and
commend Richard and his management team
for making timely and appropriate decisions in
acknowledge
our
response to market conditions and I would
and
to
like
commitment
to
demonstrate and the continued progress
being made in the year on delivery of our
software strategy.
the effort
continue
staff
The near term outlook of the Advisory and
GeoGAS divisions remains constrained, with
no clear indicators that the market is about to
turn any time soon. While the Advisory
market is difficult, the Company has retained
the skills of key people to take advantage of
any Advisory opportunities which present
themselves.
However, we do believe the new software
products which the business has and will bring
to market, leave us well positioned for the
future and will make our Company more
competitive and relevant.
Allan Brackin
Chairman
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |2
MANAGING DIRECTOR’S REPORT
FINANCIAL RESULTS
The Company’s financial performance in 2014
was another poor one. Demand for mining
advisory services, desktop software products
and coal gas exploration testing were again
impacted by weak commodity
negatively
prices,
investment by mining
companies and a restriction on capital to the
industry by the banking sector.
lack of
Group net revenue dropped by 18% to $60.4
million (2013: $73.9 million) with Advisory net
revenue decreasing by 31% to $25.9 million
(2013: $37.5 million). Software
license
revenue finished the year at $9.8 million, 44%
ahead of the previous year’s result (2013: $6.8
million). Software maintenance
revenue
increased by 12% to $12.6 million (2013:
$11.3 million).
testing and
consulting net revenue from the GeoGAS
business finished the year at $4.6 million
(2013: $7.7 million) a 40% reduction from the
previous year.
Laboratory
All operational areas of the business were
impacted by
the continuing contraction
throughout the industry resulting in a net loss
after tax of $7.4 million (including one-off
restructuring and asset write-downs). Basic
earnings per share decreased to a loss of 5.2
cents per share after last year reporting a loss
of 5.9 cents per share.
OPERATIONAL RESTRUCTURING
During the year the Company’s customer base
continued their push to reduce their capital
and operating costs as quickly as possible,
thereby directly
impacting their suppliers’
revenue opportunities which of course
included the Company.
The Company’s Advisory business and
GeoGAS business are both sensitive to coal
exploration activities which continued to be
severely curtailed.
In the Advisory space, there was less work
available due to mining companies cutting
back on exploration, capacity expansions and
mine planning. The work that was available
was hotly contested. Employees made
redundant by the mining companies started
to compete for jobs where they had intimate
knowledge of the asset or resource at rates
we were and still are unable to match. There
were very few feasibility studies or large mine
planning studies commenced over the last
twelve months. There were however a
divestments
number
undertaken by the mega mining companies
which we were fortunate enough to be
involved in - Las Bambas in Peru, Clermont
Coal in Australia, Northparkes in Australia, 5
Phosphate Projects in Brazil and 11 Coal
Mines in China.
assets
large
of
During the year we divided the business into
three operating units – Advisory, Software
and GeoGAS. This change has aligned us
better with our customer base and has
enabled our people to better utilise their
specific professional skills.
We have worked hard to build a more sales
and marketing lead business through the
creation of dedicated divisional sales teams
who think globally but act locally.
During
the 2012 and 2013 years we
aggressively reduced the Company’s cost
structure wherever possible.
In 2014 a
number of fixed cost contracts came up for
renewal (including software support and
office occupancy)
in each case we have
reduced the fixed costs of the business having
committed to either less users, less space or
renegotiated the applicable rate.
GROUP SALES AND MARKETING
2014 was focused on building a sales team
capable of competing and winning
larger
deals. During the year we increased the size
and capability of the software sales team with
the introduction of enterprise software sales
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |3
MANAGING DIRECTOR’S REPORT
professionals. We also increased the size of
the product management and global pre-sales
team. This
investment coupled with the
release of new products directly resulted in an
increase in software license sales of 44% over
the previous year. The Company also has a
software sales pipeline which
is 5 times
greater leading into 2015 than it was leading
into 2014.
In terms of marketing, with our rebranding
exercise behind us, greater focus was placed
on creating great sales collateral for the sales
teams.
the year
During
the Software division
launched XACT for Enterprise, Open Pit Metals
Solution, Open Pit Diamonds Solution, Oil
Sands Solution and HaulSim. Each product
was launched at an industry forum which was
supported with media, brochures and top
draw sales collateral.
The Advisory division had Marketing create a
included
global capability profile which
specific commodity brochures (Open Cut Coal,
Copper/Base Metals, Precious Metals, Iron
and
Lateric Ore, Uranium/REE
Ore,
Underground Coal) which have been used by
both the Business Development team and our
consultants.
We continued investment in our new website
which is our store window to the world. We
launched Russian, Chinese and Portuguese
web sites during the year along with an
so customers could
eCommerce portal
directly purchase our
smaller desktop
products.
Our relationship with SAP continues to
strengthen. During the year we expanded the
number of integration points between our
solutions along with the number of actual
middleware tools. We also built integration
into SAP’s Business Objects (BO) product and
Consolidation
Budgeting,
applications (BPC). We were also invited to
participate in SAP’s new PartnerEdge program
Planning
and
which provides us with even greater access to
software, personnel,
SAP’s development
development resources and “go-to-market”
enablement support. We now have a joint
customer who is using the full integration
between our two systems.
RESEARCH AND DEVELOPMENT
The Research and Development team had a
magnificent year. They released 7 new
products during the year along with significant
upgrades to almost all of our desktop
products. They also released the first version
of our Operating Mining Integration (OMI)
platform which forms the basis of our
enterprise software strategy.
We increased the size of the development
team over the last twelve months and with
the acquisition of the Mine2-4D software
code we will again increase its size so that we
can build out our Mine Design functionality as
quickly as possible.
While most of last year’s product releases
were oriented toward metals, the upcoming
year will see a greater emphasis on coal.
to
continue
We will
specific
commodity solutions in 2015 along with the
release of an Ultra Short term scheduling
product.
release
EMPLOYEES
It was a tough year for our employees who
saw many of their friends and colleagues
leave the business as we continued to right
size the Company.
Employee costs make up 72% of the total
operating costs for our business. At the end of
the financial year we had 284 employees
which represents a reduction of 17%
in
employee numbers from the same period in
the prior year.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |4
MANAGING DIRECTOR’S REPORT
OUTLOOK
to
on
focus
We are expecting mining companies to
continue
productivity
improvements in the year ahead. We believe
our Advisory business will remain under
pricing pressure, however, if we can continue
to win large merger and acquisition projects,
then we will continue to hold our own.
The GeoGAS business will likely remain under
pricing pressure given the current position of
it will continue
the coal
to competitive pressures by
responding
differentiating
superior
through
customer and consulting services.
industry and
itself
While we see little change in the demand for
desktop products, we remain extremely
enthusiastic about
release of our
Solutions, HaulSim
Based
Commodity
simulation product, enterprise products and
planned release of an ultra-short term
scheduling applications.
the
Our cost structure and the investments we
have made in our software offerings position
us well for the year ahead.
Richard Mathews
Managing Director and Chief Executive Officer
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |5
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 was former Non-Executive
Chairman and 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
Strategy”, published by the Society of Mining,
Metallurgy and Exploration (Denver).
“Mining 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 140
staff and 16 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 2014 |6
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
in
professional
technology
industries.
experience
than 20
services
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
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.
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,
is a Solicitor,
Member of the Queensland Law Society and a
Certificated Member of
the Governance
Institute of Australia.
CRAIG HALLIDAY
Executive General Manager – Software
Division
Craig was appointed as Executive General
Manager – Software Division in November
2013. Craig has previously served as CEO and
COO at eServGlobal. Craig has a strong record
of growing businesses to achieve consistent
profitable
completed
growth. He has
acquisitions and been instrumental in bringing
previous
funding
private
companies.
equity
into
Craig has diverse experience within the
executive
technology
management, sales management and financial
analysis. He has also set up businesses, turned
including
sector
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |7
EXECUTIVE GENERAL MANAGERS
HKEx reporting for most metalliferous Mineral
Resources.
around businesses and acquired companies
across the globe including India, China, Hong
Kong, Taiwan, South Africa, United Arab
Emirates, Spain, Chile, Japan, Brazil, Australia,
France, Germany and the United States.
Craig was previously COO at Mincom and
President of PeopleSoft Japan and held
various management positions within J.D.
Edwards.
Craig holds a Bachelor of Science from the
University of Edinburgh.
PHILIPPE BAUDRY
Executive General Manager – Advisory
Division
Philippe joined RungePincockMinarco as a
geologist in 2008 and went on to successfully
build the group’s advisory business in Asia
before recently taking executive ownership of
all Advisory Services.
Having started working life in open cut and
underground operations in Western Australia,
followed by 3 years developing large porphyry
copper projects in Russia, Philippe has spent
the last eight years focusing on financial
market
downstream
operational and exploration value creation.
transactions
and
Based out of Beijing for the past 5 years
Philippe has managed numerous Due
Diligence and Independent Technical Review
projects for private acquisitions and listing
purposes and has worked closely with leading
Chinese
and
international financial institutions in Australia,
Hong Kong, Mongolia, China and Russia.
state-owned
enterprises
Philippe holds a Bachelor of Science Mineral
Exploration and Mining Geology, an Associate
Diploma of Geoscience, a Graduate Certificate
of Geostatistics and is a Member of the
Australian Institute of Geoscientist (“MAIG”).
Philippe meets the requirements for Qualified
Person (“QP”) for 43-101 and SGX reporting,
and Competent Person (“CP”) for JORC and
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |8
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 2014 |9
DIRECTORS’ REPORT
Your Directors present their report on RungePincockMinarco Limited and its subsidiaries for the year ended 30
June 2014 (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
Executive
Richard Mathews - Managing Director
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
No dividends were paid or declared during the financial year.
4.
Review and Results of Operations
Net revenue in the 2014 financial year decreased by 18% to $60.4 million (2013: $73.9 million). Despite strong
growth in software license and maintenance revenue in the 2014 financial year, revenue from advisory and
laboratory services continued to decline due to the ongoing pullback in exploration activity and significantly
increased competition in the Australian and American markets.
During the year the Group consolidated the previous regional management structure along divisional lines to
provide greater visibility on the drivers of results from the Software, Advisory and GeoGAS operating divisions of
the Group. The Software division comprises the largest in the Group, contributing 48% of net operating revenue
(2013: 38%).
The Software division grew revenue by 4% to $28.8 million (2013: $27.7 million), primarily due to a 44% increase
in software license sales to $9.8 million (2013: $6.8 million). Net revenue from the Advisory division reduced by
$11.5 million to $25.9 million (2013: $37.5 million) and GeoGAS declined to $4.6 million (2013: $7.7 million).
The Group undertook further restructuring during the year in response to declining revenues, with Operating
costs down 15% to $61.3 million (2013: $72.0 million) however the fall in revenue resulted in an Operating
EBITDA (Earnings before Interest, Tax, Depreciation, Amortisation, Restructure and Impairment) loss of $0.9
million (2013: profit $1.9 million).
The Group reported a $7.4 million loss after tax inclusive of restructuring and impairment charges (2013: loss
$7.6 million) with a loss of 5.2 cents per share (2013: loss 5.9 cents earnings per share).
The Group had cash reserves of $7.5 million (2013: $6.9 million) and no bank debt at the end of the financial year.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |10
DIRECTORS’ REPORT
4.
Review and Results of Operations (Continued)
Software Division
Seven new software products were released during the 2014 financial year and contributed towards a 44%
increase in software license revenue to $9.8 million (2013: $6.8 million). Software sales in the traditionally strong
fourth quarter of the year were $3.3 million, marking a significant turnaround from the prior comparative quarter
sales of $1.3 million. This increase in license sales was too late in the year to impact revenue from software
consulting services which declined to $6.9 million (2013: $10.9 million) but signals a strong start to consulting and
software license sales pipelines for FY2015.
Recurring revenue from annual Software Maintenance grew by 11% to $12.5 million (2013: $11.3 million).
Advisory Division
The Advisory division provides independent consulting and advisory services which cover technical and economic
analysis and assessment of mining activities and resources on behalf of mining companies, financial institutions,
government agencies and suppliers to mining projects. The market for advisory services is heavily reliant on
expansion, development, financing and transacting of mining assets and projects.
Revenue from advisory services decreased by 30% to $25.9 million (2013: $37.5 million) with regions more
heavily dependent on the sale of mining product into export markets, such as the Australian and American
regions, being most affected by slowing activity. Revenue from these regions fell by 38% and 49% respectively.
Operating expenses for the division reduced by 19% from the prior year to $24.5 million, primarily as a result of a
20% reduction in divisional staff numbers which finished the year at 111 employees (2013: 139). The reduction in
staff numbers saw an increase in the use of associates and sub-contractors on advisory projects managed by the
division with direct costs related to advisory projects of $4.3 million for the year (2013: $4.5 million).
The Advisory division contributed 43% of Group net revenue in 2014, down from 51% in the 2013 financial year.
GeoGAS
The GeoGAS business provides mine gas consulting and laboratory testing services to the coal industry on the
East Coast of Australia. The Australian coal industry experienced further cutbacks in 2014 to exploration budgets
and forward planning activity and GeoGAS experienced significant pressure on pricing from its client base. Net
revenue was down by 40% to $4.6 million (2013: $7.7 million), however, the division remained profitable with a
segment contribution of $1.1 million at an operating margin of 23% (2013: $2.1 million).
GeoGAS comprised 7% of Group net revenue in 2014 (2013: 10%).
Operating expenses
Operating expenses before amortisation and depreciation decreased by 15% to $61.3 million during the year
(2013: $72.0 million). Most significantly, Employee Benefits expense was reduced to $44.0 million (2013: $51.7
million) due to a decrease in staff headcount to 284 (2013: 341) as a result of restructuring and redundancies.
Operating expenses include a loss from movements in foreign exchange rates of $0.4 million (2013: gain $0.2
million) and $0.9 million (2013: $0.6 million) in provisioning for doubtful receivables from exploration advisory
clients, particularly in developing economies.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |11
DIRECTORS’ REPORT
4.
Review and Results of Operations (Continued)
Restructure and Impairment costs
Restructure costs for the year totalled $4.5 million and include $1.0 million on staff restructuring, $0.5 million in
provisioning for vacant premises costs and $3.0 million in impairment of Goodwill. The staff restructuring costs
will result in annualised savings in employee costs of $4.5 million. The Group entered into an agreement to
downsize and relocate its head office premises in Brisbane during the second half of the year. The new lease will
result in annualised cash savings of $2.1 million from 1 July 2015, however it has necessitated provisioning for
surplus rental costs for vacant office space under the current lease agreement.
The Group has recognised a non-cash impairment charge of $3.0 million against goodwill allocated to the
Advisory division. The impairment reflects continued difficult trading conditions for the Advisory division, with
revenue down 31% in FY2014 which subsequently resulted in a reduction in Advisory staff throughout the year.
5.
Likely Future Developments - Business Strategies and Prospects for Future Financial Years
Software Division
In 2014 the Group realigned its reporting and management along divisional lines. In part this change was
implemented to increase focus on driving revenue and profitability of the software division. In 2014 Revenue of
the Software Division overtook Advisory for the first time since listing in 2008 and is the largest division by
revenue and headcount.
During the year the Group has launched to market seven new products and increased Q4 sales this year up 154%
compared to Q4 of 2013. New products have allowed the Group to build a much stronger pipeline of
opportunities coming into next year.
License sales in 2014 included $4.0 million from new products released in the past 12 months, with most of this
revenue coming from XERAS for Enterprise (X4E) and Open Pit Metals Solution (OPMS).
In November 2013 it was announced that three customers were trialing OPMS, two more customers acquired
OPMS in the second half of the year.
In May 2014 the Company announced that one of its new software products, XERAS for Enterprise (X4E) is
currently implemented by three major clients in South Africa, Australia and Indonesia. Since this announcement,
three more customers acquired X4E in 2014 with implementations in limited trial sites under way.
In many cases the licence sales in 2014 represent pilot or initial licence purchases with further sales to customer
groups expected in the future based on go-lives, product rollouts and incremental features and functions being
introduced into future releases of the products.
Design Software Acquisition
The Company is well known for its range of short-term and long-term planning and scheduling software solutions.
The Company historically provided import/export functionality to various mine design tools of different vendors
to allow feedback between design and scheduling process and will continue to do so. However, full integration
with its own design tool will greatly improve the Company’s software offering.
The Company acquired Mine2-4D design tool software code to develop its own design capability. It is expected
that the first release of this new product will be in the second quarter of 2015.
Advisory and GeoGAS
Near term outlook for the businesses remains tough, however, longer term fundamentals remain positive.
Management had acted decisively in the past and will continue to do so in future. Abundance of low cost
competition is expected to keep pressure on revenue and margins in these businesses in the near term but longer
term remains still positive.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |12
DIRECTORS’ REPORT
5.
Likely Future Developments - Business Strategies and Prospects for Future Financial Years (Continued)
New Head Office lease
The Group entered into a lease agreement to downsize and relocate its Head Office premises in Brisbane at the
end of the next financial year. The new lease will result in $2.1 million in cash savings from July 2015. However, it
necessitated increasing provisions for make good and accelerating depreciation of existing fitout costs. The
additional costs would amount to $1.6 million non-cash depreciation expense over 2015 and approximately $1.1
million in cash costs to make good and reinstate current premises to base building in the last quarter of the next
year.
Capital Raising
The Company has raised $21 million on 1 August 2014 in a share placement from institutional investors. The
placement was significantly oversubscribed and provides the Group capacity to expand business through further
acquisition and investment in its software products.
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 intervene 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, other than for Group pursuing outstanding accounts receivable through courts.
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
On 1 August 2014 the Company has completed a placement of 35,000,000 ordinary shares for cash consideration
of $21,000,000 to institutional investors in Australia.
The Company has offered a Share Purchase Plan (SPP) to shareholders on the register as at 31 July 2014. The
purpose of SPP is to give all current shareholders the ability to by up to $15,000 worth of the Company’s shares
on the same terms as the institutional placement. The SPP is not underwritten and the Board intends to cap the
total raising at $1,200,000 (2,000,000 shares). No shares were allocated under the SPP as at the date of this
report.
On 8 August 2014 the Company acquired a non-exclusive right to the software code of the Mine2-4D mine design
application from South African technology company MineRP, for $1,250,000. The Company intends to rebrand
and integrate the product with its existing software product suite. The costs of acquisition and internal software
development will be capitalised in accordance with the Intangible Asset accounting policy, refer note 1 (o).
No other matter or circumstance has arisen since 30 June 2014 that has significantly affected the Group’s
operations, results or state of affairs, or may do so in the future years.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |13
DIRECTORS’ REPORT
9.
Information on Current Directors and Company Secretary
Directors
Experience
Allan Brackin 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
Dr Ian Runge 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
Ross Walker Non–executive Director. Joined the Board in March 2007.
Richard
Mathews
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
Appointed Managing Director 28 August 2012.
Richard was previously the Non-Executive Chairman and 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 and director of eServGlobal Ltd in 2009 - 2014.
Special
responsibilities
Chairman
Member and
Chairman – HR and
Remuneration
Committee
Member of Audit and
Risk Committee (from
12 August 2014)
Non-executive Director
Member – Audit and
Risk Committee
Non-executive Director
Member and
Chairman – Audit and
Risk Committee
Member – HR and
Remuneration
Committee
Executive Director
Member – HR and
Remuneration
Committee
All Directors are members of the Nominations Committee.
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.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |14
DIRECTORS’ REPORT
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 2014 and the number of meetings attended by each Director were:
Full meetings
of Directors
Audit & Risk
Committee
HR & Remuneration
Committee
Attended
Held
Attended
Held
Attended
Held
Allan Brackin
Dr Ian Runge
Ross Walker
Richard Mathews
10
10
8
10
11.
Insurance of Officers
10
10
10
10
-
4
4
-
-
4
4
-
2
-
2
2
2
-
2
2
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.
12.
Shares Under Option
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
26/08/2013*
29/11/2013*
19/02/2014
31/03/2014
Expiry date
30/09/2014
31/08/2016
31/08/2016
31/08/2016
29/11/2018
19/02/2019
31/03/2019
Issue price of shares
$0.57
$0.40
$0.55
$0.55
$0.68
$0.67
$0.73
Number under option
294,935
1,796,000
578,600
1,539,734
1,743,000
350,000
250,000
6,552,269
* Included in these options were options granted as remuneration to the five highest remunerated officers during
the year. Details of options granted to the five highest remunerated officers who are also key management
personnel are disclosed in the section 20E of the Remuneration report. No options were granted to officers who
are among the five highest remunerated officers of the Company and the Group, but are not key management
personnel and, hence, not disclosed in the remuneration report.
No option holder has any right under the options to participate in any other share issue of the Company or any
other entity.
13.
Shares issued on the exercise of options
The following ordinary shares in the Company were issued during the year on the exercise of options granted
under the Company’s Employee Shares Option Plan. No further shares have been issued under the plan since 30
June 2014. No amounts are unpaid on any of the shares.
Date options granted
14/12/2010
Expiry date
30/09/2014
Issue price of shares
Number of shares issued
$0.57
35,734
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |15
DIRECTORS’ REPORT
14.
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.
15.
Non-audit services
There were no non-audit services provided by BDO Audit Pty Ltd, its related practices and non-related audit firms
in the 2014 financial year.
16.
Indemnity of Auditors
The Company has agreed to indemnify and hold harmless its auditors, BDO Audit Pty Ltd, against any and all
losses, claims, costs, expenses, actions, demands, damages, liabilities or any other proceedings whatsoever
incurred by the auditors in respect of any claim by a third party arising from or connected to any breach by the
Company.
17.
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 26 .
18.
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*
RungePincockMinarco Limited
Ordinary
shares
Options over
ordinary shares
927,528
16,310,484
900,000
7,109,503
-
-
-
-
* Includes 175,560 shares held by R Mathews as trustee under a bare trust arrangement for a third party.
19.
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.
20.
Remuneration Report - Audited
The remuneration report is set out under the following main headings:
A.
B.
C.
D.
E.
F.
Principles used to determine the nature and amount of remuneration;
Service agreements;
Details of remuneration;
Bonus and share-based compensation;
Equity instruments held by key management personnel; and
Other transactions with key management personnel.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |16
DIRECTORS’ REPORT
20.
Remuneration Report - Audited (Continued)
20A.
Principles Used to Determine the Nature and Amount of Remuneration
Remuneration and compensation have the same meaning in this report.
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, the EGMs of Software Division, Advisory Division and 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 2014 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 2014 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 25 to the financial
statements). The current long-term performance incentive structure was implemented in the 2008 year and
amended in 2010, 2012 and 2014 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 2014 |17
DIRECTORS’ REPORT
20.
Remuneration Report - Audited (Continued)
20A.
Principles Used to Determine the Nature and Amount of Remuneration (Continued)
Performance based compensation
Year ended
30 June
STI
$’000
2010
2011
2012
2013
2014
55
75
56
-
-
Short-term Incentive Bonus
LTI
$’000
115
-
68
(71)
33
Total
$’000
Net profit/(Loss)
$’000
Dividends
$’000
Share price
$
170
75
124
(71)
33
2,288
3,590
6,237
(7,565)
(7,351)
4,343
1,241
2,482
2,482
-
0.40
0.37
0.35
0.47
0.58
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. In 2014 100% of STI was linked to Company NPAT target.
Cash bonuses are paid, provided for or forfeited in the year to which they relate. All payments under the EGMIP
for the 2014 year were forfeited.
Long-term Incentive
Options were issued in 2011, 2012, 2013 and 2014 under the Employee Share Option Plan (ESOP) to KMP at the
discretion of the Board.
Consistent with the current ESOP plan terms approved by shareholders at the Company’s 2013 Annual General
Meeting, the rules of the ESOP Plan enable the Board to determine the applicable vesting criteria and to set a
timetable for vesting of options in the Offer Document, including vesting in tranches over a defined period. The
Board has the discretion on whether or not to set performance hurdles for vesting or to link vesting solely to a
defined service period in order to drive key staff retention and reward longevity of service.
The options issued since November 2013 vest in tranches over a three year period, have vesting conditions linked
to the holder maintaining employment with the Company over that period and were issued at an exercise price
based on the volume weighted average price of the Company’s shares in the five days prior to each grant.
The options issued in 2012 and 2013 vest in accordance with the table on the following page 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.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |18
DIRECTORS’ REPORT
20.
Remuneration Report - Audited (Continued)
20A.
Principles Used to Determine the Nature and Amount of Remuneration (Continued)
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 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:
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
75
percentile or higher
20%
The Board has a Margin Loan 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 $500,000, unchanged since it was approved in the 2009 Annual General
Meeting.
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 2014 |19
DIRECTORS’ REPORT
20.
Remuneration Report - Audited (Continued)
20B.
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
C Halliday
P Baudry
Terms of agreement
Unlimited in term
Unlimited in term
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
$501,250
$360,525
$240,350
$250,574
US $350,000
$375,000
Termination benefit
Notice Period
Nil
Nil
Nil
6 months
6 months
3 months
2 months
1 month
1 month
Nil
Nil
Nil
6 months
3 months
3 months
2 months
1 month
1 month
The KMP are also entitled to receive upon 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.
20C. Details of Remuneration
Directors
Chairman (Non-executive)
Allan Brackin
Executive Directors
Richard Mathews - Managing Director
Non-executive Directors
Dr Ian Runge
Ross Walker
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 2014 financial year:
Name
Kieran Wallis
Position
Executive General Manager – Corporate Services
Michael Kochanowski
Chief Financial Officer
James O’Neill
Craig Halliday
Philippe Baudry
Group General Counsel and Company Secretary
Executive General Manager – Software Division (commenced 1 November 2013)
Executive General Manager - Advisory Division (commenced in this role 1 November
2013, previously General Manager – Australasia, Russia and CIS)
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.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |20
DIRECTORS’ REPORT
20.
Remuneration Report - Audited (Continued)
20C. 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
2014
Directors
A Brackin
Dr I Runge
R Walker
R Mathews
Cash salary and
fees
$
109,840
80,000
80,000
471,373
741,213
Other Key Management Personnel
K Wallis
M Kochanowski
J O’Neill
C Halliday2
P Baudry2
330,369
222,293
229,358
244,301
382,524
1,408,845
2,150,058
Total
2013
Directors
A Brackin
Dr I Runge
R Walker
R Mathews
D Meldrum3
C Larsen3
110,088
80,000
80,000
415,121
86,985
104,959
877,153
-
-
-
10,075
10,075
10,075
10,075
10,075
12,674
8,498
51,397
61,472
-
-
-
7,941
54,551
-
62,492
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,160
-
-
29,878
40,038
30,156
18,056
21,216
9,723
-
79,151
119,189
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
120,000
80,000
80,000
511,326
791,326
-
-
-
-
-
(1,211)
2,148
1,335
32,500
(1,913)
32,859
32,859
369,389
252,572
261,984
299,198
389,109
1,572,252
2,363,578
(0.3)
0.9
0.5
10.9
(0.5)
2.0
1.3
9,912
-
-
20,966
15,627
4,118
50,623
-
-
-
-
607,556
252,899
860,455
-
-
-
-
(37,611)
(25,102)
(62,713)
120,000
80,000
80,000
444,028
727,108
336,874
1,788,010
Value of
options
as
propor-
tion of
remun-
eration
%
-
-
-
-
-
(0.3)
0.9
0.5
10.9
(0.5)
2.0
1.3
-
-
-
-
(5.2)
(7.5)
(3.5)
1.2
0.8
(9.4)
1.3
(0.9)
(2.6)
-
-
-
-
(5.2)
(7.5)
(3.5)
1.2
0.8
(9.4)
1.3
(0.9)
(2.6)
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
1 Includes car park and health insurance
9,472
31,178
2,647
5,268
48,565
111,057
2 Became Key Management Personnel during the year
4,545
2,046
(17,247)
1,915
(8,741)
(71,454)
24,750
19,800
14,971
11,591
71,112
121,735
-
-
95,409
-
95,409
955,864
373,717
251,318
183,775
147,567
956,377
2,744,387
3 Resigned during the year
The termination benefit includes contractual termination benefit, and any statutory entitlements.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |21
DIRECTORS’ REPORT
20.
Remuneration Report - Audited (Continued)
20D.
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 25 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 25 to the financial
statements.
Number of options
granted during the year
Number of options
vested during the year 2
Value of options at
grant date 1
$
-
-
-
-
27,206
14,734
14,734
113,950
35,245
A Brackin
Dr I Runge
R Walker
R Mathews
K Wallis
M Kochanowski
J O’Neill
C Halliday
P Baudry
1 The value at grant date calculated in accordance with AASB 2 Share-based Payment of options granted during the year as
-
-
-
-
215,734
85,000
85,000
500,000
300,000
-
-
-
-
15,733
10,533
-
-
10,533
part of remuneration.
2 Options with a grant date of 2010 vested in September 2013 with an exercise price of $0.57.
Options granted under the plan carry no dividend or voting rights.
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, and the amount is included in the remuneration tables above.
All cash bonuses for KMP and CEO were forfeited in 2014.
Details of remuneration: Bonuses and share-based compensation benefits
The terms and conditions of each grant of options affecting remuneration in the current or a future reporting
period are as follows:
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |22
DIRECTORS’ REPORT
20.
Remuneration Report - Audited (Continued)
20D.
Bonuses and Share-based Compensation Benefits (Continued)
Grant
date
14/12/2010
14/12/2010
14/12/2010
29/05/2012
03/05/2013
26/08/2013
29/11/2013
29/11/2013
29/11/2013
Vesting and exercise
date
31/08/2012
31/08/2013
31/08/2014
1/09/2014
1/09/2014
01/09/2014
30/11/2014
30/11/2015
30/11/2016
Expiry date
30/09/2014
30/09/2014
30/09/2014
31/08/2016
31/08/2016
31/08/2016
29/11/2018
29/11/2018
29/11/2018
Exercise
Price
$
0.57
0.57
0.57
0.40
0.55
0.55
0.68
0.68
0.68
Value per
option at
grant date
$0.20
$0.19
$0.19
$0.12
$0.20
$0.10
$0.21
$0.23
$0.25
Details of options over ordinary shares in the company provided as remuneration to key management personnel
are shown below. When exercisable, each option is convertible into one ordinary share of RungePincockMinarco
Limited. The vesting conditions are set out in Section 20A.
The table also shows the percentages of the options granted that vested and were forfeited during the year.
Further information on the options is set out in note 25 to the financial statements.
Year of
grant
Years in
which
option
may vest
Number of
options
granted
Value of
option
at grant
date *
Number of
options
vested
during the
year
Vested
%
Number of
options
forfeited
during the
year
Value at
date of
forfeiture**
Forfeited %
A Brackin
Dr I Runge
R Walker
R Mathews
K Wallis
M Kochanowski
J O’Neill
C Halliday
P Baudry
-
-
-
-
2011
2012
2013
2014
2014
2011
2012
2013
2014
2014
2013
2014
2014
2014
2011
2012
2013
2014
2014
-
-
-
-
2013-2015
2015
2015
2015
2015-2017
2013-2015
2015
2015
2015
2015-2017
2015
2015
2015-2017
2015-2017
2013-2015
2015
2015
2015
2015-2017
-
-
-
-
118,000
150,000
2,800
165,734
50,000
79,000
50,000
33,400
35,000
50,000
115,000
35,000
50,000
500,000
79,000
135,000
33,400
250,000
50,000
-
-
-
-
$0.19 - $0.20
$0.12
$0.20
$0.10
$0.21 - $0.25
$0.19 - $0.20
$0.12
$0.20
$0.10
$0.21 - $0.25
$0.20
$0.10
$0.21 - $0.25
$0.21-$0.25
$0.19 - $0.20
$0.12
$0.20
$0.10
$0.21 - $0.25
-
-
-
-
15,733
-
-
-
-
10,533
-
-
-
-
-
-
-
-
10,533
-
-
-
-
-
-
-
-
13%
-
-
-
-
13%
-
-
-
-
-
-
-
-
13%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* The value at grant date calculated in accordance with AASB 2 Share-based Payment of options granted during the year as part of remuneration
** The value of the options that were granted as part of remuneration and that were forfeited (lapsed) during the year because a vesting condition was not satisfied was determined at the time of lapsing, but
assuming the condition was satisfied.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |23
DIRECTORS’ REPORT
20E.
Equity Instruments held by Key Management Personnel
No shares were granted as compensation in 2014 (2013: nil). 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)
Options
Name
A Brackin
Dr I Runge
R Walker
R Mathews
K Wallis
M Kochanowski
J O’Neill
C Halliday
P Baudry
(ii)
Ordinary Shares
Balance
at the start of
the year
Granted as
compensation
Forfeited and
expired
Balance
at the end of
the year
Vested and
exerciseable
-
-
-
-
184,266
115,000
115,000
-
200,000
-
-
-
-
215,734
85,000
85,000
500,000
300,000
-
-
-
-
-
-
-
-
-
-
-
-
-
400,000
200,000
200,000
500,000
500,000
-
-
-
-
15,733
21,067
-
-
21,067
Balance
at the start of the year
Sold
during
the year
Acquired
during
the year
Balance
at the end of the year
Directors
A Brackin
Dr I Runge
R Walker
R Mathews
327,273
16,310,484
627,273
6,512,003*
Other key management personnel of the Group
K Wallis
M Kochanowski
J O’Neill
C Halliday
P Baudry
17,552
69,371
-
1,829,574*
72,976
-
-
-
-
-
-
-
-
600,255
-
272,727
540,000
-
-
2,000
387,000
110,000
927,528
16,310,484
900,000
7,052,003*
17,552
69,371
2,000
2,216,574*
182,976
* Includes 175,560 shares held by R Mathews as trustee under a bare trust arrangement for C Halliday.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |24
DIRECTORS’ REPORT
20.
Remuneration Report - Audited (Continued)
20F. Other Transactions with Key Management Personnel
The Group employs the services of Pitcher Partners Chartered Accountants, an entity associated with Ross
Walker. Pitcher Partners received $9,100 (2013: $80,290) for taxation and advisory services. Amount payable at
year end $3,740 (2013: $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 Annual General Meeting (AGM)
2014
$
2013
$
9,100
9,100
80,290
80,290
The Company’s 2013 remuneration report was unanimously adopted by show of hands at 2013 AGM. The
Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices.
Remuneration report - End
This report is made in accordance with a resolution of the Directors.
Allan Brackin
Chairman
Dated: 20 August 2014
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |25
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 2014, I declare that, to the
best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of RungePincockMinarco Limited and the entities it controlled during the
period.
A S Loots
Director
BDO Audit Pty Ltd
Brisbane, 20 August 2014
BDO Audit Pty Ltd ABN 33 134 022 870 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. Liability limited by a scheme approved under Professional
Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2014
Notes
2014
$’000
2013
$’000
Revenue from continuing operations
Services
Licence sales
Software maintenance
Other revenue
Revenue
Rechargeable expenses
Net Revenue
Expenses
Amortisation
Depreciation
Employee benefits expense
Other employee costs
Office expenses
Professional services
Rent
Restructure and Impairment costs
Travel expenses
Other expenses
Loss before finance costs and income tax
Finance income
Finance costs
Net finance costs
Loss before income tax
Income tax benefit
Loss
41,462
9,779
12,570
1,420
65,231
(4,794)
60,437
(1,381)
(2,134)
(43,993)
(979)
(3,141)
(1,625)
(6,740)
(4,459)
(1,714)
(3,191)
(69,357)
(8,920)
110
(244)
(134)
(9,054)
1,703
(7,351)
60,287
6,823
11,348
1,238
79,696
(5,795)
73,901
(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)
12
11
4
5
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |27
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2014
Notes
2014
$’000
2013
$’000
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:
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)
24
24
(7,351)
(7,565)
(341)
658
-
(341)
(7,692)
(5.2)
(5.2)
(480)
178
(7,387)
(5.9)
(5.9)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |28
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2014
Notes
2014
$’000
2013
$’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
Investments accounted for using the equity method
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
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
28(c)
11
6
12
13
14
15
16
15
6
16
17
18
18
7,521
11,372
2,700
669
1,464
23,726
6,928
16,887
1,998
1,201
1,583
28,597
386
348
26
-
6,361
8,200
7,949
6,143
23,257
27,333
37,979
42,024
61,705
70,621
5,111
5,154
-
14
2,604
3,285
22
10,353
18,090
681
69
2,831
3,581
112
9,799
18,364
640
236
3,713
4,589
21,671
22,953
40,034
47,668
48,678
48,664
(4,283)
(3,986)
(4,361)
2,990
40,034
47,668
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |29
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2014
Contributed
equity
Reserves
Retained profits
Total equity
Balance at 1 July 2013
Loss 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
$'000
48,664
$'000
(3,986)
-
-
-
14
-
14
-
(341)
(341)
-
44
44
$'000
$'000
2,990
(7,351)
-
(7,351)
-
-
-
47,668
(7,351)
(341)
(7,692)
14
44
58
Balance at 30 June 2014
48,678
(4,283)
(4,361)
40,034
Balance at 1 July 2012
Loss 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
-
-
9,246
48,664
39,418
(4,135)
-
-
-
-
178
178
-
(29)
-
(29)
(3,986)
13,037
(7,565)
-
(7,565)
-
-
(2,482)
(2,482)
2,990
48,320
(7,565)
178
(7,387)
9,246
(29)
(2,482)
6,735
47,668
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |30
CONSOLIDATED STATEMENT OF CASHFLOWS
FOR THE YEAR ENDED 30 JUNE 2014
Notes
2014
$'000
2013
$'000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest and dividends received
Finance costs
Restructure costs
Income taxes received/(paid)
Net cash (outflow) / inflow from operating activities
22
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
73,191
(70,350)
2,841
110
(219)
(1,445)
173
1,460
(261)
170
-
(379)
(470)
14
-
-
-
-
14
1,004
6,928
(411)
7,521
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
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |31
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.
RungePincockMinarco Limited is a listed public company, incorporated and domiciled in Australia.
The financial report comprises the consolidated entity (“Group”) consisting of RungePincockMinarco Limited
and its subsidiaries.
(a)
Basis of Preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and interpretations issued by the Australian Accounting Standards Board 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 new and amended standards are mandatory for the first time for the financial year beginning 1
July 2013:
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]
The adoption of these standards 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 2014 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”.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |32
NOTES ON THE FINANCIAL STATEMENTS
1.
(b)
Summary of Significant Accounting Policies (Continued)
Principles of Consolidation (Continued)
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls
an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are 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.
(c)
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.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |33
NOTES ON THE FINANCIAL STATEMENTS
1.
(c)
Summary of Significant Accounting Policies (Continued)
Income Tax (Continued)
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.
(d)
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’).
is
The
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.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |34
NOTES ON THE FINANCIAL STATEMENTS
1.
(e)
iii)
Summary of Significant Accounting Policies (Continued)
Foreign Currency Translation (Continued)
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.
(f)
i)
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.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |35
NOTES ON THE FINANCIAL STATEMENTS
1.
(g)
Summary of Significant Accounting Policies (Continued)
Trade Receivables (Continued)
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 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.
(i)
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
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |36
NOTES ON THE FINANCIAL STATEMENTS
1.
(j)
Summary of Significant Accounting Policies (Continued)
Leases (Continued)
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.
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.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |37
NOTES ON THE FINANCIAL STATEMENTS
1.
(l)
Summary of Significant Accounting Policies (Continued)
Impairment of Assets (Continued)
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.
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 areas of 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.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |38
NOTES ON THE FINANCIAL STATEMENTS
1.
(o)
iii)
Summary of Significant Accounting Policies (Continued)
Intangible Assets (Continued)
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.
(q)
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the
redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest
method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the
extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred
until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility
will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period
of the facility to which it relates.
Borrowings are removed from the statement of financial position when the obligation specified in the contract
is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has
been extinguished or transferred to another party and the consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognised in 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.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |39
NOTES ON THE FINANCIAL STATEMENTS
1.
(s)
i)
Summary of Significant Accounting Policies (Continued)
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.
iii)
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 25.
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.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |40
NOTES ON THE FINANCIAL STATEMENTS
1.
(t)
Summary of Significant Accounting Policies (Continued)
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.
ii)
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.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |41
NOTES ON THE FINANCIAL STATEMENTS
1.
(y)
Summary of Significant Accounting Policies (Continued)
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)),
deferred tax assets (note 6).
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 27 has been
prepared on the same basis as the consolidated financial statements, except as set out below:
(i)
Investments in subsidiaries
Investment in subsidiaries are accounted for at cost in the financial statements of RungePincockMinarco
Limited.
(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 2014, are as follows:
(j)
IFRS 15 Revenue from Contracts with Customers
This standard establishes a single revenue recognition framework and supersedes IAS 11 Construction
Contracts, IAS 18 Revenue, Interpretation 13 Customer Loyalty Programmes, Interpretation 15
Agreements for the Construction of Real Estate, Interpretation 18 Transfers of Assets from Customers,
and Interpretation 131 Revenue – Barter Transaction Involving Advertising Services. This standard is
applicable to annual reporting periods beginning on or after 1 January 2017, with early adoption
permitted once approved by the AASB in Australia. Under the new standard, an entity should recognise
revenue to depict the transfer of promised goods and services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. Hence,
the revenue will be recognised when control of goods or services is transferred, rather than on transfer of
risks and rewards as is currently in IAS 18 Revenue. This new standard requires the use of either method
using retrospective application to each reporting period in accordance with IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors, or retrospective application with the cumulative effect of
initially applying IFRS 15 recognised directly in equity. The Group is currently assessing the impact of this
standard.
The group has not adopted changes to the accounting standards that were issued in December 2013 (AASB
2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial
Instruments).
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |42
NOTES ON THE FINANCIAL STATEMENTS
2.
Operating Segments
Operating segments are reported in a manner consistent with the internal reporting provided to the CEO in
order to make decisions about resource allocations and to assess performance of the Group. The reports are
split into functional divisions: Software Division, Advisory Division and GeoGAS.
Software Division provides all of the Group’s Software offerings, including maintenance, training and
implementation services to mining companies.
Advisory Division provides consulting and advisory services which cover technical and economic analysis and
assessment of mining activities and resources on behalf of mining companies, financial institutions, customers
of mining companies (eg coal fired electricity generators), lessors and potential lessors of mineral rights to
mining companies, government departments and agencies and suppliers to mining companies and projects.
GeoGAS provides services to coal mining clients in respect of gas content testing and relevant consulting
services.
Segment revenue, expenses and results include transfers between segments. Such transfers are priced on an
“arms-length” basis and are eliminated on consolidation.
In the prior year the group did not have a divisional structure and was managed along the regional lines with
four regions: Australia, Asia, America and Africa. GeoGAS was reported as a separate division in 2013. June 2013
segments were restated to align with the current internal reporting structure.
Information about reportable segments
2014
2013
Software
Division
Advisory
Division
GeoGAS
Total
Software
Division
Advisory
Division
GeoGAS
Total
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Revenue
External Sales
Inter-segment sales
Total Revenue
Rechargeable expenses
Net revenue
Total Expenses
29,215
30,224
495
29,710
(868)
28,842
(478)
29,746
(3,825)
25,921
4,669
(17)
4,652
(101)
4,551
64,108
28,145
41,904
-
64,108
(4,794)
59,314
210
28,355
(647)
27,708
(25)
41,879
(4,424)
37,455
8,570
(185)
8,385
(724)
7,661
78,619
-
78,619
(5,795)
72,824
(17,634)
(24,528)
(3,480)
(45,642)
(19,095)
(30,502)
(5,529)
(55,126)
Segment profit/(loss)
11,208
1,393
1,071
13,672
8,613
6,953
2,132
17,698
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |43
NOTES ON THE FINANCIAL STATEMENTS
2.
Operating Segments (Continued)
Reconciliation of segment profit to reported net profit:
Segment result
Adjustments:
Foreign exchange gains/(losses)
Employment benefits – corporate and IT
Other unallocated costs – corporate and IT
Software Development Division
Restructure and impairment costs
Depreciation and amortisation
Net finance costs
Unallocated income
Loss before income tax
Income tax benefit
Net loss
Geographical Information
2014
$'000
2013
$'000
13,672
17,698
(363)
(3,859)
(5,601)
(5,918)
(4,459)
(3,515)
(134)
1,123
(9,054)
1,703
(7,351)
153
(4,292)
(6,728)
(5,905)
(5,416)
(3,794)
(432)
924
(7,792)
227
(7,565)
Segment revenue is based on the geographical location of customers and segment assets are based on the
geographical location of the assets.
Australia
Indonesia
Canada
USA
South Africa
Hong Kong
Mongolia
China
Brazil
Japan
India
Other
2014
2013
Revenues
$’000
Non-current
assets1
$’000
Revenues
$’000
Non-current
assets1
$’000
20,993
23,110
31,053
8,865
7,325
5,446
6,480
1,184
2,037
1,771
874
467
1,521
7,145
64,108
78
57
9,346
7,951
1,662
5,502
302
137
14
169
43
-
-
51
25,623
4,971
2,757
2,333
1,995
1,920
1,391
1,169
8,231
78,619
27,209
183
102
1,747
384
131
20
181
81
-
-
77
30,115
1Excludes financial instruments and deferred tax assets.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |44
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:
2014
2013
Net Revenue
$'000
Operating segment
Unallocated revenue
Foreign exchange gains
Unallocated corporate assets
Reported
1 Excludes financial instruments and deferred tax assets
3.
Profit Before Income Tax
59,314
1,123
-
-
60,437
Non-current
Assets1
$’000
Net Revenue
$'000
Non-current
Assets1
$’000
25,623
72,824
30,115
-
-
4,407
30,030
924
153
-
73,901
-
-
5,766
35,881
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 (profit)/loss on disposal of plant and equipment
Foreign exchange (gains) / losses
4.
Restructure and Impairment Costs
2014
$'000
2013
$'000
2,510
892
734
6,649
(84)
363
2,548
578
320
6,144
6
(153)
Following the appointment of Richard Mathews to the role of Managing Director and Chief Executive Officer at
the end of August 2012, the Group continued 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:
Goodwill – Advisory Division
Plant and equipment (fitout)
Goodwill – South Africa
Software development costs
Other Restructure costs:
Employment termination costs
Onerous lease obligations
Other closure costs
3,000
-
-
-
-
701
384
321
3,000
1,406
933
488
38
1,459
4,459
2,540
1,284
186
4,010
5,416
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |45
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
Numerical reconciliation of income tax expense to prima facie tax
Loss before income tax
Tax at the Australian tax rate of 30% (2013: 30%)
Tax effect of amounts which are not taxable/(deductible)
in calculating taxable income:
Attributed income
Non-deductible expense
Research and development deduction
Unutilised foreign tax credits
Unrecognised deferred tax assets
Difference in overseas tax rates
Over/(under) provision in prior years
Income tax benefit/(expense)
Tax consolidation legislation
2014
$'000
2013
$'000
(360)
1,415
648
1,703
(9,054)
2,716
(7)
(925)
351
(11)
(1,062)
1,062
(7)
648
1,703
(1,390)
1,641
(24)
227
(7,792)
2,338
(9)
(202)
222
(960)
(1,030)
359
(108)
(24)
227
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.
Significant Estimates – Deferred Tax Assets
An assessment of the recoverability of the net deferred tax assets has been made to determine the carrying
value. At each reporting period, the recoverability of the net deferred tax assets will be reassessed. This may
lead to the recognition of this unrecognized tax benefit in future reporting periods.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |46
NOTES ON THE FINANCIAL STATEMENTS
6.
Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are attributable to the following:
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
Reclassified from current
Over/(under) provision in prior years
Balance at 30 June
Unrecognised deferred tax assets
Foreign tax credits
Tax losses
Capital losses
Deductible temporary differences
2014
$'000
2013
$'000
277
1,228
1,350
5,398
465
29
112
3
‐
(27)
(310)
(389)
(212)
(44)
7,949
(69)
7,880
5,907
1,415
‐
(61)
76
543
7,880
270
877
485
1,086
2,718
76
1,115
1,358
3,493
478
76
154
3
192
(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
Foreign tax credits will expire in 2017. Some of the Tax losses expire in 2015. Capital losses do not expire,
however, it is not probable that the Group would generate capital gains to utilise the benefit. Deductible
temporary differences have not been recognised because it is not probable that sufficient future taxable
profit will be available.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |47
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 and deposits
2014
$'000
2013
$’000
4,935
2,586
7,521
12,500
(1,336)
11,164
208
11,372
386
386
4,541
2,387
6,928
17,413
(602)
16,811
76
16,887
348
348
As at 30 June 2014, trade receivables of $4,815,000 (2013: $9,601,000) 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
1,358
1,247
2,210
4,815
602
(12)
(78)
892
(68)
1,336
3,928
3,263
2,410
9,601
282
(18)
(277)
578
37
602
The provision for impairment of trade receivables in 2014 and 2013 relates to receivables that are past due for
more than 90 days.
9.
Work in Progress
Work in progress
2,700
1,998
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |48
NOTES ON THE FINANCIAL STATEMENTS
10.
Other Assets
Prepayments
11.
Property, Plant and Equipment
Plant and equipment - at cost
Less: accumulated depreciation
Plant and equipment under finance lease
Less: accumulated depreciation
2014
Balance at 1 July 2013
Exchange differences
Additions
Disposals
Depreciation
Balance at 30 June 2014
2013
Balance at 1 July 2012
Exchange differences
Additions
Impairment
Disposals
Depreciation
Balance at 30 June 2013
2014
$'000
2013
$’000
1,464
1,583
17,766
(11,405)
6,361
-
-
-
17,944
(9,745)
8,199
33
(32)
1
6,361
8,200
Note
Plant and equipment
Owned
$’000
Under
finance lease
$’000
Total
$’000
8,199
(25)
672
(351)
(2,134)
6,361
10,190
40
970
(701)
(69)
(2,231)
8,199
1
(1)
-
-
-
-
9
1
-
-
-
(9)
1
8,200
(26)
672
(351)
(2,134)
6,361
10,199
41
970
(701)
(69)
(2,240)
8,200
4
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |49
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
2014
$'000
2013
$'000
5,756
(4,432)
1,324
7,001
(6,101)
901
1,494
(1,494)
-
24,032
(3,000)
21,032
23,257
5,623
(4,039)
1,584
6,756
(5,073)
1,683
1,494
(1,494)
-
24,450
(384)
24,066
27,333
Software For Sales
to Customers 1
Software For
Internal Use
Goodwill
$'000
$'000
$'000
Total
$'000
1,683
219
(3)
(9)
-
(989)
901
1,584
132
-
-
-
(392)
1,324
24,066
-
-
(34)
(3,000)
-
21,032
2014
Balance at 1 July 2013
Additions
Disposal
Exchange differences
Impairment 2
Amortisation
Balance at 30 June 2014
2013
Balance at 1 July 2012
Additions
Disposal
Exchange differences
Impairment 2
Amortisation
Balance at 30 June 2013
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 in note 4.
2,528
394
-
21
(94)
(1,166)
1,683
24,290
-
-
160
(384)
-
24,066
1,858
341
-
-
(227)
(388)
1,584
27,333
351
(3)
(42)
(3,000)
(1,381)
23,257
28,676
735
-
181
(705)
(1,554)
27,333
(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 2014 |50
NOTES ON THE FINANCIAL STATEMENTS
12.
(a)
Intangible Assets (Continued)
Impairment Tests for Goodwill (Continued)
A segment level summary of the goodwill is presented below.
Australia
USA
Advisory Division
Software Division
GeoGAS
2014
$'000
2013
$'000
-
-
6,555
9,556
4,921
21,032
17,547
1,598
-
-
4,921
24,066
(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:
Advisory Division
Software Diivision
GeoGAS
Margin1
Growth Rate2
Discount Rate3
2014
14%
49%
21%
2013
-
-
35%
2014
2.5%
2.5%
3.0%
2013
-
-
1.0%
2014
17%
17%
15%
2013
-
-
18%
-
-
16%
Australia
USA4
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 in 2013
1.0%
1.0%
20%
22%
19%
-
-
-
-
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.
In the prior year the group did not have a divisional structure and was managed along the regional lines with
four regions: Australia, Asia, America and Africa. Aggregation of assets for CGUs was changed to align with the
new CGU structure.
(c)
Impairment charges
The goodwill previously allocated to Australia and USA was split equally between Advisory and Software
Divisions. Based on the above assumptions and calculations, an impairment of $3,000,000 has been applied to
goodwill in the Advisory division as the carrying amount of goodwill exceeded its recoverable amount.
(d)
Impact of possible changes in key assumptions
An increase of 80 basis points to the pre-tax discount rate applied to the cash projections of GeoGAS would
result in the recoverable amount of the CGU being equal to the carrying amount of goodwill.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |51
NOTES ON THE FINANCIAL STATEMENTS
12.
(d)
Intangible Assets (Continued)
Impact of possible changes in key assumptions (Continued)
An increase of 100 basis points to the pre‐tax discount rate applicable to the cash projections of the Software
Division would not results in impairment of the Goodwill.
An increase of 100 basis points to the pre‐tax discount rate applicable to the cash projections of the Advisory
Division would result in additional impairment of Goodwill of $800,000.
13.
Trade and Other Payables
Current
Trade payables
Other payables and accruals
14.
Borrowings
Current
Lease liabilities (note 21)
Terms and Conditions
2014
$'000
2013
$'000
2,066
3,045
5,111
1,976
3,178
5,154
‐
‐
14
14
Borrowing
facilities
Secured loan
Bank overdraft
Finance leases
Loans and Borrowings
Other facilities
Currency
Nominal
interest
rate
2014
2013
Maturity
Facility
$’000
Utilised
$’000
Facility
$’000
Utilised
$’000
AUD
AUD
CAD
6.13%
7.04%
Sep 2014
n/a
‐
Oct 2013
‐
5,000
‐
5,000
‐
‐
‐
‐
15,000
‐
14
15,014
‐
‐
14
14
Bank guarantee
AUD
2.50%
n/a
3,112
1,633
3,112
2,635
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
2014
$'000
2013
$'000
2,604
3,285
681
640
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |52
NOTES ON THE FINANCIAL STATEMENTS
16.
Other Liabilities
Current
Unearned income - software maintenance
Unearned income - consulting and other
Lease incentive and make good obligations
Non-current
2014
$'000
6,053
2,515
1,785
10,353
2013
$'000
5,660
3,146
993
9,799
Lease incentive and make good obligations
2,831
3,713
17.
Contributed Equity
Share capital
2014
Number
2013
Number
2014
$'000
2013
$'000
Ordinary shares
- fully paid
141,380,950
141,345,216
48,678
48,664
Movements in Share Capital:
Date
30/06/2012
Balance
Partly paid shares paid up
Issue of share capital
Costs of issue
Exercise of employee options
30/06/2013
Balance
Exercise of employee options
Costs of issue
30/06/2014
Balance
Ordinary Shares
Ordinary shares
Number
$’000
124,080,000
39,418
-
17,249,482
-
15,734
2
9,487
(252)
9
141,345,216
48,664
35,754
-
20
(6)
141,380,950
48,678
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.
Options
Information relating to the RungePincockMinarco 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 25.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |53
NOTES ON THE FINANCIAL STATEMENTS
17.
Contributed Equity (Continued)
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.
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 2014 and 30 June 2013 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
2014
$'000
2013
$'000
5,111
(7,521)
(2,410)
40,721
38,311
n/a
742
(1,889)
(1,601)
18
(1,553)
(4,283)
5,168
(6,928)
(1,760)
47,668
45,908
n/a
697
(1,547)
(1,601)
18
(1,553)
(3,986)
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).
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |54
NOTES ON THE FINANCIAL STATEMENTS
18.
Reserves and Retained Profits (Continued)
Nature and Purpose of Reserves (Continued)
(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.
Movement in Reserves
Share-based payments
2014
$'000
2013
$'000
Foreign Currency
Translation
2014
$'000
2013
$'000
Financial Assets
Revaluation Reserve
2013
2014
$'000
$'000
Balance at 1 July
Options expensed
Income tax
Foreign currency translation
Balance at 30 June
697
44
-
-
741
726
(29)
-
-
697
(1,547)
-
-
(342)
(1,889)
(2,205)
-
-
658
(1,547)
(1,601)
-
-
-
(1,601)
(1,121)
-
(480)
-
(1,601)
There were no other movements in reserves in 2014 and 2013.
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
Franked Dividends
Franking credits available for subsequent financial years based on a tax rate of 30%
(2013: 30%)
2014
$'000
2013
$'000
2,990
(7,351)
-
(4,361)
-
-
-
-
13,037
(7,565)
(2,482)
2,990
1,241
1,241
2,482
-
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 2014 |55
NOTES ON THE FINANCIAL STATEMENTS
20.
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
Unistar – Mongolia
2014
$
2013
$
157,000
150,000
977
21,336
17,787
14,650
3,058
2,053
21,725
14,400
13,650
2,997
214,808
204,825
21.
(a)
Commitments
Non-cancellable Operating Leases
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:
2014
$’000
2013
$’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
6,470
9,614
1,312
17,396
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
174
-
174
6,074
10,684
1,566
18,324
602
133
735
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |56
NOTES ON THE FINANCIAL STATEMENTS
21.
(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
2014
$’000
2013
$’000
‐
‐
‐
‐
‐
‐
‐
‐
14
1
15
(1)
14
14
‐
14
Finance leases relate to motor vehicles which have residual payments with options to purchase at the end of
the lease term.
22.
Reconciliation of Net Profit to Net Cash Inflow / (outflow) from Operating Activities
Net profit / (loss)
Depreciation and amortisation
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 provision for impairment of receivables
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
(7,351)
3,515
90
3,000
247
44
4,541
532
(1,806)
(702)
(38)
(753)
734
94
(89)
(167)
(431)
1,460
411
411
(7,565)
3,794
63
1,406
(81)
(29)
6,242
(938)
(97)
568
(79)
(2,243)
320
(1,180)
(761)
(1,530)
(3,738)
(5,848)
82
82
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |57
NOTES ON THE FINANCIAL STATEMENTS
23.
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
2014
$'000
2013
$'000
7,521
11,758
19,279
5,111
-
5,111
6,928
17,235
24,163
5,154
14
5,168
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.
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.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |58
NOTES ON THE FINANCIAL STATEMENTS
23.
(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.
62% of cash and trade receivables are held with ‘AA’, ‘A’, ‘BAA’, ‘BA’ or ‘B’ – rated customers and banks (2013:
53%). 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
2014
$'000
8,061
3,957
7,261
19,279
2013
$'000
5,871
6,877
11,415
24,163
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:
2014
Carrying
amount
Contractual
cash flows
6 mths or
less
6-12 mths
1-2 years
2-5 years
Trade and other payables
2013
Finance lease liabilities
Trade and other payables
$'000
$'000
$'000
$'000
$'000
$'000
5,111
5,111
14
5,154
5,168
5,111
5,111
15
5,154
5,169
5,111
5,111
15
5,154
5,169
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
More
than 5
years
$'000
-
-
-
-
-
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.
(c)
Market Risk
Currency Risk
The current policy is not to take any forward positions. At 30 June 2014 and 2013 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.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |59
NOTES ON THE FINANCIAL STATEMENTS
23.
(c)
Financial Risk Management (Continued)
Market Risk (Continued)
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:
2014
Cash and deposits
Trade and other receivables
Trade and other payables
Interest bearing liabilities
Net balance sheet exposure
2013
Cash and deposits
Trade and other receivables
Trade and other payables
Interest bearing liabilities
Net balance sheet exposure
USD
$’000
CAD
$’000
ZAR
$’000
Other
$’000
Total
$’000
2,919
4,672
(661)
-
6,930
2,059
9,201
(319)
-
10,941
334
767
(94)
-
1,007
561
806
(182)
(14)
1,171
578
1,462
(396)
-
1,644
1,559
1,235
(93)
-
2,701
1,417
573
(729)
-
1,261
1,641
784
(733)
-
1,692
5,248
7,474
(1,880)
-
10,842
5,820
12,026
(1,327)
(14)
16,505
A 10 percent strengthening of the Australian dollar against the above currencies at 30 June 2014 based on
assets and liabilities at 30 June 2014 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 2013.
2014
2013
Equity
$'000
Profit/(Loss)
$'000
Equity
$'000
Profit/(Loss)
$'000
(966)
(118)
(1,172)
(328)
A 10 percent weakening of the Australian dollar against the above currencies at 30 June 2014 would have had
equal but opposite effect on the above currencies to the amounts shown above.
Net Fair Values
(d)
The net fair values of financial assets and liabilities approximate their carrying value. No financial assets or
liabilities are readily traded on organised markets in standardised form.
24.
Earnings Per Share
Basic earnings per share
Diluted earnings per share
2014
Cents
(5.2)
(5.2)
2013
Cents
(5.9)
(5.9)
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |60
NOTES ON THE FINANCIAL STATEMENTS
24.
Earnings Per Share (Continued)
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
25.
Share Based Payments
Tax Exempt Share Plan
2014
$’000
2013
$’000
(7,351)
(7,565)
2014
Number ‘000
2013
Number ‘000
141,353
128,022
-
-
141,353
128,022
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 2014 or 2013.
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 7 October 2009, 28 October 2011 and most recently on 29 October 2013 following approval of shareholders
at the Company’s 2013 Annual General Meeting.
Eligible participants of the ESOP include any person who is employed by, or is a director, officer or executive (or
their approved permitted nominee), of the Group and whom the Board or its nominee determines is eligible to
participate in the Option Plan. A permitted nominee includes a company controlled by the employee, a trust in
which the employee has, or may have entitlements or such other entity as approved by the Board. Options are
granted at the discretion of the Board of Directors.
All options under the ESOP are to be offered to eligible employees for no consideration. The offer to the eligible
participant must be in writing and specify amongst other things, the number of options for which the eligible
employee may apply, the period within which the options may be exercised, any conditions to be satisfied
before exercise, the option expiry date and the exercise price of the options, as determined by the Board. The
Board can impose any restrictions on the exercise of options as it considers fit.
The rules of the ESOP plan enable the Board to determine the applicable vesting criteria and to set a timetable
for vesting of options in the offer document, including vesting in tranches over a defined period. The Board has
the discretion on whether or not to set performance hurdles for vesting or to link vesting solely to a defined
service period in order to drive key staff retention and reward longevity of service.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |61
NOTES ON THE FINANCIAL STATEMENTS
25.
Share Based Payments (Continued)
The options may be exercised, in part or full, subject to the employee continuing to be employed at the relevant
vesting dates, by the participant giving a signed notice to the Company and paying the exercise price in full. The
Company will apply for official quotation of any Shares issued on exercise of any options.
The rules of the plan allow the Board to set the exercise price per Option in the offer document.
Subject to the accelerated expiry terms set out in the ESOP plan (explained further below), options will expire
five years after the date of grant subject to the option holder remaining employed by the Company.
Unexercised options will automatically lapse upon expiry. Unless determined otherwise by the Board, in the
event of stated events detailed in the plan, including termination of employment or resignation, redundancy,
death or disablement or in the event of a change of control of an employee’s permitted nominee, unvested
options shall lapse and the expiry date of any vested options will be adjusted in accordance with the accelerated
timetables set out in the ESOP plan rules (subject to the Board’s discretion to extend the term of exercise in
restricted cases).
Once shares are allotted upon exercise of the options the participant will hold the shares free of restrictions.
The shares will rank equally for dividends declared on or after the date of issue but will carry no right to receive
any dividend before the date of issue. Should the Company undergo a reorganisation or reconstruction of
capital or any other such change, the terms of the options (including number or exercise price or both) will be
correspondingly changed to the extent necessary to comply with the Listing Rules. With this exception, the
terms for the exercise of each Option remains unchanged. In the event of a change of control of the Company,
all options will vest immediately and may be exercised by the employee (regardless of whether the vesting
conditions have been satisfied). A holder of options is not entitled to participate in dividends, a new or bonus
issue of Shares or other securities made by the Company to Shareholders merely because he or she holds
options.
The Options are not transferable, assignable or able to be encumbered, without Board consent and the options
will immediately lapse upon any assignment, transfer or encumbrance, with the exception of certain dealings in
the event of death of the option holder.
The ESOP plan will be administered by the Board which has an absolute discretion to determine appropriate
procedures for its administration and resolve questions of fact or interpretation and formulate terms and
conditions (subject to the Listing Rules) in addition to those set out in the ESOP plan.
The ESOP plan may be terminated or suspended at any time by the Board. The ESOP plan may be amended or
modified at any time by the Board except where the amendment reduces the rights of the holders of options,
unless required by the Corporations Act or the Listing Rules, to correct any manifest error or mistake or for
which the option holder consents. The Board may waive or vary the application of the ESOP plan rules in
relation to any eligible employee at any time.
The vesting conditions attached to the options are set out in the Remuneration Report (20A) of the Directors’
Report.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |62
NOTES ON THE FINANCIAL STATEMENTS
25.
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
2014
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
29/05/2012
1/09/2014
31/08/2016
03/05/2013
1/09/2014
31/08/2016
26/08/2013
01/09/2014
31/08/2016
29/11/2013
30/11/2014
29/11/2018
29/11/2013
30/11/2015
29/11/2018
29/11/2013
30/11/2016
29/11/2018
19/02/2014
19/02/2015
19/02/2019
19/02/2014
19/02/2016
19/02/2019
19/02/2014
19/02/2017
19/02/2019
31/03/2014
31/03/2015
31/03/2019
31/03/2014
31/03/2016
31/03/2019
31/03/2014
31/03/2017
31/03/2019
0.57
0.57
0.57
0.40
0.55
0.55
0.68
0.68
0.68
0.67
0.67
0.67
0.73
0.73
0.73
160,278
93,062
93,062
1,956,000
578,600
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,539,734
580,987
581,004
581,009
116,666
116,666
116,668
83,333
83,333
83,334
Total
2,881,002
3,882,734
-
-
(15,733)
(160,000)
-
-
-
-
-
-
-
-
-
-
-
(175,733)
(29,068)
131,210
(6,666)
-
-
-
-
-
-
-
-
-
-
-
-
-
(35,734)
86,396
77,329
1,796,000
578,600
1,539,734
580,987
581,004
581,009
116,666
116,666
116,668
83,333
83,333
83,334
6,552,269
Weighted average exercise price
0.45
0.63
0.42
0.57
0.56
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.
The weighted average remaining contractual life of share options outstanding at the end of the period was 2.91
years (2013: 2.87 years).
The fair values at grant date for non-market options (EBITA & EPS and Service 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 2014 |63
NOTES ON THE FINANCIAL STATEMENTS
25.
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 2014, 2013, 2012 and 2011 financial years included:
Options
with
market
hurdles
Dec
2010
Options with non-market hurdles
Dec
2010
Nov
2012
May
2013
Aug
2013
Nov
2013
Feb
2014
Mar
2014
Fair value of share options at grant date:
Option vesting date
31/08/2012
31/08/2013
31/08/2014
01/09/2014
01/09/2014
01/09/2014
30/11/2014
30/11/2015
30/11/2016
19/02/2015
19/02/2016
19/02/2017
31/03/2015
31/03/2016
31/03/2017
Assumptions:
Share price
Exercise price
Expected volatility
(weighted average
volatility)
Option weighted average
life
Expected dividends
Risk-free interest rate1
1 based on government bonds
$0.196
$0.193
$0.193
$0.24
$0.25
$0.24
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$0.119
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$0.199
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$0.095
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$0.205
$0.229
$0.249
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$0.215
$0.247
$0.272
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$0.239
$0.274
$0.302
$0.57
$0.57
$0.57
$0.57
$0.40
$0.40
$0.595
$0.55
$0.50
$0.55
$0.68
$0.68
$0.65
$0.67
$0.715
$0.73
70%
70%
50%
50%
37.5%
40%
50%
50%
3.8 years 3.8 years 3.8 years 3.3 years
3 years
5 years
5 years
5 years
5%
5%
6%
5.31%
5.31%
2.60%
3.5%
2.5%
4%
0%
0%
0%
2.75%
3.44%
3.42%
3.44%
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).
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |64
NOTES ON THE FINANCIAL STATEMENTS
Share Based Payments (Continued)
25.
Employee Expenses
Share-based payment expense recognised during the financial year
Options issued under employee option plan
2014
$’000
2013
$’000
44
44
(29)
(29)
26.
Contingent liabilities and contingent assets
There are no contingent liabilities or contingent assets that require disclosure in the financial report.
27.
Parent Entity Disclosures
As at and throughout the financial year ending 30 June 2014 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
(7,553)
-
(7,553)
12,392
55,818
10,095
14,802
(386)
-
(386)
22,870
68,870
16,666
20,359
48,678
48,664
741
18
(600)
(7,821)
41,016
-
-
697
18
(600)
(268)
48,511
-
-
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 (2013: $98,000). The periods covered by the guarantees range from two to three years.
No deficiency of net assets existed in the controlled entities covered by guarantees at 30 June 2014 or 30 June
2013. No liability was recognised by the parent entity in relation to these guarantees, as the fair value of the
guarantee is immaterial.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |65
NOTES ON THE FINANCIAL STATEMENTS
28.
Interests in other entities
(a) Material subsidiaries
The Group’s principal subsidiaries at 30 June 2014 are set out below. All subsidiaries have share capital
consisting solely of ordinary shares that are 100% held directly by the Group, and the proportions of ownership
interests held equals the voting rights held by the Group. The country of incorporation or registration is also
their principal place of business.
Name of entity
GeoGAS Pty Ltd
Runge Indonesia Technology Pty Ltd
Runge Inc
RungePincockMinarco (Canada) Ltd
PT RungePincockMinarco
Runge Asia Ltd
Core Global Mining Solutions Beijing Co. Ltd
RungePincockMinarco LLC
CJSC Runge
MRM Mining Services (Pty) Ltd
Place of
business/incorpo
ration
Australia
Australia
USA
Canada
Indonesia
Hong Kong
China
Mongolia
Russia
Principal Activities
Laboratory Services
Software Sales and Services
Software and Advisory Services
Software Sales and Services
Advisory Services
Advisory Services
Advisory Services
Advisory Services
Software and Advisory Services
South Africa
Software Sales and Services
RungePincockMinarco Limited Latin America Limitada
Runge Servicos de Consultoria do Brasil Ltda
Chile
Brazil
Software Sales and Services
Software Sales and Services
All entities other than GeoGAS Pty Ltd trade as RungePincockMinarco.
(b) Significant Restrictions
Cash and Short term deposits held in Chile, Brazil, South Africa, China, Indonesia, Mongolia and Russia are
subject to local exchange control regulations. These regulation provide restrictions on exporting capital from
those countries other than through normal trading transactions or dividends.
The carrying amount of cash included within the consolidated financial statements to which these restrictions
apply is $3,091,000 (2013: $4,102,000).
(c) Interests in joint ventures
The Group has a 49% interest in RungePincockMinarco India Pte Ltd, an entity registered in India, which is
accounted for using the equity method. The summary of amounts in the reports for this entity is disclosed
below:
Carrying Amount
Group’s share of:
Profit/(loss) from continuing operations
Other comprehensive income
Total comprehensive income
2014
$'000
2013
$'000
26
-
-
-
-
-
-
-
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |66
NOTES ON THE FINANCIAL STATEMENTS
29.
Key Management Personnel Disclosures
(a) Compensation
Short term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
2014
$
2,211,530
119,189
-
32,859
2013
$
1,738,242
121,735
955,864
(71,454)
2,363,578
2,744,387
(b) Other Transactions with Key Management Personnel
The Group employs the services of Pitcher Partners Chartered Accountants, an entity associated with Ross
Walker. Pitcher Partners received $9,100 (2013: $80,290) for taxation and advisory services. Amount payable at
year end $3,740 (2013: $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
2014
$
2013
$
9,100
9,100
80,290
80,290
30.
Events occurring after the reporting period
On 1 August 2014 the Company has completed a placement of 35,000,000 ordinary shares for cash
consideration of $21,000,000 to institutional investors in Australia.
The Company has offered a Share Purchase Plan (SPP) to shareholders on the register as at 31 July 2014. The
purpose of SPP is to give all current shareholders the ability to by up to $15,000 worth of the Company’s shares
on the same terms as the institutional placement. The SPP is not underwritten and the Board intends to cap the
total raising at $1,200,000 (2,000,000 shares). No shares were allocated under the SPP as at the date of this
report.
On 8 August 2014 the Company acquired a non-exclusive right to the software code of the Mine2-4D mine
design application from South African technology company MineRP, for $1,250,000. The Company intends to
rebrand and integrate the product with its existing software product suite. The costs of acquisition and internal
software development will be capitalised in accordance with the Intangible Asset accounting policy, refer note 1
(o).
No other matter or circumstance has arisen since 30 June 2014 that has significantly affected the Group’s
operations, results or state of affairs, or may do so in the future years.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |67
DIRECTORS’ DECLARATION
In the directors' opinion:
the attached financial statements and notes thereto comply with the Corporations Act 2001, the
Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements;
the attached financial statements and notes thereto comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board as described in note 1 (a) to the
financial statements;
the attached financial statements and notes thereto give a true and fair view of the consolidated
entity's financial position as at 30 June 2014 and of its performance for the financial year ended on that
date;
the remuneration disclosures included in pages 16 to 25 of the directors’ report (as part of audited
Remuneration Report), for the year ended 30 June 2014, comply with section 300A of the Corporations
Act 2001; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors
Allan Brackin,
Chairman
Dated this 20th day of August 2014
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |68
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 2014, 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 33 134 022 870 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. Liability limited by a scheme approved under Professional
Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
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 2014
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 16 to 25 of the directors’ report for the
year ended 30 June 2014. 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
2014 complies with section 300A of the Corporations Act 2001.
BDO Audit Pty Ltd
A S Loots
Director
Brisbane, 20 August 2014
BDO Audit Pty Ltd ABN 33 134 022 870 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. Liability limited by a scheme approved under Professional Standards Legislation (other than for the
acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
CORPORATE GOVERNANCE STATEMENT
Corporate Governance Statement – Year Ended 30 June 2014
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 corporate governance statement has been approved by the Board of RungePincockMinarco Limited and
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) and is current as at the date of
this report.
P R I N CI P LE 1 : – L AY SO L I D F O U N D AT I O N S FO R M A N A GE M E NT A ND O V ER 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 periodically to ensure it is
operating effectively and in the best interests of the Company. The Board Charter was last amended on 21
August 2013.
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)
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;
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |71
CORPORATE GOVERNANCE STATEMENT
P R I N CI P LE 1 : – L AY SO L I D F O U N D AT I O N S FO R M A N A GE M E NT A ND O V ER S I G H T
( C O N T I N U ED )
h)
i)
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.
The Board delegates specific responsibilities to various Board Committees. For the 2014 Financial Year, the
Board utilised the following Committees:
An Audit and Risk Committee, currently chaired by independent director Ross Walker, which among
other things responsible for overseeing the external and internal auditing functions of the Company’s
activities; and
An Human Resources and Remuneration Committee, which is currently chaired by independent director
and Company Chairman Allan Brackin, 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.
The duties of the Nominations Committee are currently being carried out by the entire Board and as such
separate meetings for the Nominations Committee did not occur during the 2014 Financial Year.
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
The Charter of each of the above listed Committees were adopted by the Board on 11 April 2008, are reviewed
periodically to ensure it is operating effectively and in the best interests of the Company and were last amended
on 12 August 2014.
Timetables for Board and Committee meetings are agreed by the Board annually in advance.
Delegations to the CEO 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 18 February 2014.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |72
CORPORATE GOVERNANCE STATEMENT
P R I N CI P LE 1 : – L AY SO L I D F O U N D AT I O N S FO R M A N A GE M E NT A ND O V ER S I G H T
( C O N T I N U ED )
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. Appropriate checks are undertaken by the Company’s Human Resources
department before new appointments are made, including through use of telephone screening, in person
interviews, employment history and character reference checks and criminal history checks for financial related
positions.
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 2014 financial year in accordance with the process
adopted by the Board. The assessment for the 2014 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 following the Board meeting on 12 August 2014.
Performance reviews for the Company’s Executives have been complete for the 2014 financial year and were
reported to the HR and Remuneration Committee on 22 July 2014. Both qualitative and quantitative measures
were utilised consistent with KPOs set by the CEO in consultation with the key executives.
P R I N CI P LE 2 : - S T R U CT U R E T H E B O AR D T O A D D V AL 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.
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 9 of the Annual Report in the section entitled “Information on Current
Directors and Company Secretary”.
Current Board Composition
Director
Board membership
Original 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
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |73
CORPORATE GOVERNANCE STATEMENT
P R I N CI P LE 2 : - S T R U CT U R E T H E B O AR D T O A D D V AL U E ( C O N T I N UE D )
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:
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.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |74
CORPORATE GOVERNANCE STATEMENT
P R I N CI P LE 2 : - S T R U CTU R E T H E B O A RD TO AD D V AL U E ( C O N T I N U ED )
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
developing succession plans for the Board and overseeing development by management of succession
planning for senior executives.
The Nominations
http://www.rpmglobal.com/investor-relations/corporate-governance
Committee
Charter
found
can
be
on
the
Company’s website,
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
did not occur during the 2014 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 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 Item 20F of the Remuneration report and note 29(b) (Other Transactions with Key Management Personnel)
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 during the 2014 financial
year.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |75
CORPORATE GOVERNANCE STATEMENT
P R I N CI P LE 2 : - S T R U CTU R E T H E B O A RD TO AD D V AL U E ( C O N T I N U ED )
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 CI P LE 3 : P R OM OT E E T H I C AL A N D R E SP 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 Directors, executives and employees within the Group must adhere whilst conducting their duties. The Code
of Conduct Policy can be found on the Company’s website, at: http://www.rpmglobal.com/investor-
relations/corporate-governance
The Code of Conduct Policy was adopted by the Board on 11 April 2008 and is reviewed periodically to ensure it
remains up-to-date and in the best interest of the Company. The Code was last amended by the Board on 12
August 2014 and incorporates the Company’s Whistleblower Policy.
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, equity and personal integrity;
b) comply fully with the content and spirit of all laws, legislation and regulations which govern the Company’s
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 fraudulent, corrupt, illegal or unethical activity;
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;
h) not take advantage of their position or the opportunities arising therefrom for personal gain; and
i)
report any possible improprieties in financial reporting, internal control or other matters covered by the
Code.
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. RPM will not act to the
detriment of any employee as a consequence of them raising any breach of law, concerns about possible
improprieties in financial reporting, internal control or other matters including any violation of the Code. All
reports received will be thoroughly investigated and any necessary action taken.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |76
CORPORATE GOVERNANCE STATEMENT
P R I N CI P LE 3 : P R OM OT E E T H I C AL A N D R E SP 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 ED )
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 Diversity Policy can be found on the Company’s website, at: http://www.rpmglobal.com/investor-
relations/corporate-governance.
The Diversity Policy is reviewed periodically by the Board to ensure it remains up-to-date and was last updated
by the Board on 12 August 2014.
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,
subject to the overriding objective that all appointments will be made on the basis of merit. This objective was
originally set against a 30 June 2013 target date.
In accordance with the requirements of the Australian Workplace Gender Equality Act 2012 (Act), the Company
lodged its annual public report with the Workplace Gender Equality Agency for its Australian operations on 29
May
at:
this
http://www.rpmglobal.com/investor-relations/corporate-governance.
the Company’s website,
found on
2014. A
copy of
can be
report
Progress
At a Group level, as at 14 August 2014, of the 296 employees employed throughout the Group in full time, part
time and casual employment 24% (71) employees are female and 76% (225) are male.
The Company remains committed to its measurable objective for diversity set in 2012 to have 35% of women
across the whole organisation, however due to current market conditions the Board has recognised this
objective is likely to be achieved over a longer period as the market improves. Accordingly, the Board resolved
on 12 August 2014 to reset the target date for achieving this objective to 30 June 2017.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |77
CORPORATE GOVERNANCE STATEMENT
P R I N CI P LE 3 : P R OM OT E E T H I C AL A N D R E SP 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 ED )
Recommendation 3.4: Companies should disclose proportion of women employees in the Company, in senior
executive positions and on the Board
The following table details the proportion of female employees across the Group as at 14 August 2014:
Female Directors on the Board / Chief Executive
Female Key Management Personnel (KMP)
Female Other Executive / General Management Positions (excl. KMP)
Total Female Employees across Group
P R I N CI P LE 4 : S A F E GUA R D I N T EG R I T Y I N F I N A N C I A L R EP 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.
No.
-
-
1
71
%
-
-
25%
24%
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
During the 2014 financial year, the Committee consisted of two Non-executive Directors, one of whom is
independent and chaired the Committee, and the Chief Financial Officer. To ensure the highest possible level of
independence and consistent with best practice governance standards, the Board resolved during its regular
periodic review of the Audit and Risk Committee Charter on 12 August 2014 that the committee position
previously filled by the Chief Financial Officer would be filled going forward by a second independent director
and the Company’s Chairman, Mr Allan Brackin. The Committee retains the unrestricted right of access to
executive management including the Chief Financial Officer as required. The Committee will remain chaired by
Mr Ross Walker who 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)
Dr Ian Runge
Member (Non-executive)
Mr Allan Brackin
Member (Non-executive and independent) [replacing Mr Michael Kochanowski
Chief Financial Officer effective 12 August 2014]
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |78
CORPORATE GOVERNANCE STATEMENT
P R I N CI P LE 4 : S A F E GUA R D I N T EG R I T Y I N F I N A N C I A L R EP O R T I N G ( CO N T I N U E D )
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, at: http://www.rpmglobal.com/investor-relations/corporate-governance
The Audit and Risk Committee Charter was adopted by the Board on 11 April 2008 and is reviewed periodically
to ensure it is operating effectively and in the best interests of the Company. The Charter was last reviewed and
updated by the Board on 12 August 2014.
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 CI P LE 5 : M A KE T IM E L Y A N D B A L A N C ED D I S C L O S UR 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/investor-relations/corporate-governance
The Continuous Disclosure Policy and market Disclosure Guidelines were adopted by the Board on 30 October
2008 and are reviewed periodically to ensure they remain up-to-date and in the best interests of the Company
and Shareholders. The Policy was last reviewed and updated by the Board on 12 August 2014.
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.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |79
CORPORATE GOVERNANCE STATEMENT
P R I N CI P LE 5 : M A KE T IM E L Y A N D B A L A N C ED D I S C L O S UR E ( CO N T I NU E D )
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.
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 CI P LE 6 : R E S P E CT T H E R I G H T S O F S H AR 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/investor-relations/corporate-governance
The Company’s Shareholder Communication Policy was adopted by the Board on 30 October 2008 and is
reviewed periodically to ensure it remains up-to-date and in the best interests of the Company and
Shareholders. The Policy was last reviewed and updated by the Board on 12 August 2014.
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/investor-relations/corporate-governance
The Company’s Securities Trading Policy was adopted by the Board on 30 October 2008 and is reviewed
periodically to ensure it remains up-to-date and in the best interests of the Company and Shareholders. The
Policy was last reviewed and updated by the Board on 12 August 2014.
P R I N CI P LE 7 : R E C O G NI S E A N D M A N A G E R I SK
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.
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CORPORATE GOVERNANCE STATEMENT
P R I N CI P LE 7 : R E C O G NI S E A N D M A N A G E R I SK ( C O N T I N UE D )
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.
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 remains 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 CI P LE 8 : R E M U N E R A T E F A I RL Y A N D R ES 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.
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |81
CORPORATE GOVERNANCE STATEMENT
P R I N CI P LE 8 : R E M U N E R A T E F A I RL Y A N D R ES P O N S I B L Y ( C O N T I N UE D )
A copy of the HR and Remuneration Committee Charter can be found on the Company’s website at:
http://www.rpmglobal.com/investor-relations/corporate-governance
The HR and Remuneration Charter was adopted by the Board on 30 October 2008 and is reviewed periodically
to ensure it is operating effectively and in the best interests of the Company. The Charter was last reviewed and
updated by the Board on 12 August 2014.
Recommendation 8.2: The Committee should be structured appropriately
The Committee is comprised of three Directors, two of whom are independent. 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)
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 2014 |82
SHAREHOLDER INFORMATION
The shareholder information set out below was applicable as at 8 August 2014.
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
Options
92
233
82
327
96
830
-
2
4
47
17
70
The number of shareholdings held in less than marketable parcels of 863 shares is 70.
B.
Equity Security Holders
Twenty largest quoted security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
NATIONAL NOMINEES LIMITED
RUNGE INTERNATIONAL PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
KINNANE ASSET MANAGEMENT PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
PAUA PTY LTD
BNP PARIBAS NOMS PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
MIRRABOOKA INVESTMENTS LIMITED
UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD
MR STEPHEN JOHN BALDWIN AND MRS ANDREA MAREE BALDWIN
CITICORP NOMINEES PTY LIMITED
AMCIL LIMITED
MR DAVID BRIAN MELDRUM
ANAJAM PTY LIMITED
EQUITAS NOMINEES PTY LIMITED
MS TRACY ROWLANDS
MRS ANDRE JOAN PHILLIPS
MRS DONNA MARGARET LUXTON
Number held
41,486,880
15,810,389
15,436,616
11,804,529
7,734,983
7,329,504
6,552,003
4,678,632
3,568,551
3,500,000
2,753,421
2,642,511
2,382,187
2,000,000
1,877,811
1,815,099
1,488,824
1,245,889
1,173,508
1,123,001
Percentage of
issued shares
23.52
8.96
8.75
6.69
4.39
4.16
3.71
2.65
2.02
1.98
1.56
1.50
1.35
1.13
1.06
1.03
0.84
0.71
0.67
0.64
Unquoted equity securities
6,552,269 options over unissued shares: for further details see note 25.
136,404,338
77.32
RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2014 |83
SHAREHOLDER INFORMATION
C.
Substantial Holders
The names of the substantial shareholders listed in the holding register are:
IOOF Holdings Limited*
Runge International Pty Ltd
Commonwealth Bank of Australia
Paradice Investment Management Pty Ltd*
Challenger Limited/Greencape Capital Pty Ltd
Discovery Asset Management Pty Ltd*
* Estimated beneficial holdings as at 8 August 2014.
D.
Voting Rights
Refer to note 17 for voting rights attached to ordinary shares.
Number held
Percentage
18,748,973
16,310,484
13,973,890
12,147,505
11,700,000
10,778,181
10.63
9.25
7.92
6.89
6.63
6.11
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Level 12, 333 Ann St, Brisbane QLD 4000
P: +61 7 3100 7200 F: +61 7 3100 7297
www.rpmglobal.com