RPMGlobal Holdings Limited
Annual Report 2015

Plain-text annual report

ANNUAL REPORT 2015 For personal use only CONTENTS Chairman’s Report …………………………………………………………………………………………………………………….. Managing Director’s Report ……………………………………………………………………………………….……………… Directors' Report …………………………………………………………………………………………..…………………..…….… Auditor’s Independence declaration………………………………………………………..…………………………………. Consolidated Statement of Comprehensive Income …………………………………..……………………...……… Consolidated Statement of Financial Position ………………………………………………………………….………… Consolidated Statement of Changes in Equity ……………………………………………………………...…………… Consolidated Statement of Cashflows …………………………………………………………………..…………………… Notes on the Financial Statements …..……………………………………………………………………………………….. Directors’ Declaration …………………………………………………………………………………..…..…..………………….. Independent Auditor's Report …………………………………………………………………….…………………..………… Corporate Governance Statement ……………………………………………………..……….…………………..…..…… Shareholder Information …………………………………………………………………………………………………………… Corporate Directory ……………………………………………………………………………………………….…………….….… 1 3 6 23 24 26 27 28 29 64 65 67 68 70 For personal use only CHAIRMAN’S REPORT Dear Fellow Shareholders, The past twelve months have again been challenging for the industry in which the Company operates. Whilst the software business has had an outstanding year and the GeoGAS business has been steady, our Advisory business has been negatively impacted once again. The fallout from the recent mining boom, which saw a significant increase in the supply of resources from both new mines and extensions to existing mines, has continued. During the last financial year, the price of Iron Ore and Oil dropped dramatically as a result of the current and forecasted increases in supply and the continued drop in growth in China. The export price for both Thermal and Coking Coal again dropped during the year as initiatives mining companies’ productivity resulted in increased supply at cheaper overall operating costs. imperative for mining The overriding companies continues to be to reduce their cost of mining. In this regard, the low hanging fruit was harvested during the 2013 and 2014 years which has meant that incremental savings are now coming from larger and more strategic economic decisions like whether or not to mothball operating mines, place them into care and maintenance or alternatively put them up for sale. We believe that the next wave of productivity improvements will come through software innovation and integration between the major system providers to the mining industry and we have positioned ourselves at the forefront of this endeavour. There has been little activity in the area of in the mining Mergers and Acquisitions industry over the last twelve months which suggests that potential buyers believe that the bottom of the market has not yet been reached. We do however expect to see more activity in this area in the upcoming year given the number of assets which have been put up for sale. The significant pull back in capital investment by mining companies continued throughout the 2015 financial year which has really hurt the upstream services companies and has resulted in the value of their business being heavily impacted. The junior miners continue to focus on cash preservation rather than exploration. There has been little to no new equity investment into the resources sector over the past twelve months and the analysts are predicting this to continue for the foreseeable future. In last year’s Annual Report, we 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 Advisory and GeoGAS divisions. This downsizing cost the Company $1.3 million in redundancy costs as more highly remunerated employees left the business this year than in previous years. The annualised savings in employment costs as a result of this restructure is $3.8 million We also moved into smaller and cheaper office accommodation in Brisbane, Sydney, Jakarta, Toronto and Gillette, with similar changes planned this year in Denver and Santiago, which significantly reduces our ongoing fixed costs. As a result of the premises restructure, the Company booked $1.5 million in once-off accelerated depreciation (2014: $0.2 million) and onerous lease obligations of $1.9 million (2014: $0.5 million) this financial year. The annualised savings in premises costs as a result of these accommodation changes is $1.4 million. While the Board believes that the Company’s cost structure is now appropriate for our RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |1 For personal use only CHAIRMAN’S REPORT current revenue expectations, we will continue to remain vigilant and monitor the industry situation closely. acquired the exclusive rights in the mining industry to a copy of the FlexSim Software Products, Inc. (FlexSim) simulation software. While 2015 has been another difficult year for suppliers to the mining industry, we have really started to see the benefit of our software strategy on the performance of the business. We are not aware of any other industry software provider to the mining growing their software license revenue by anywhere near the growth we have seen over the last two years. It is clear to us that the Company’s strategic move from providing desktop applications to enterprise systems has the support of the world’s major mining companies. This is evidenced not only by the growth in our software business during a time of severe austerity in the mining industry, but more importantly the relevance of the conversations we are having with the senior management teams at our current customers and potential new customers. As per our stated strategy, we have continued to invest in our technology products. During the year we released a QUARRY commodity based solution and XECUTE the Company’s new ultra-short term planning solution. The new products which have been released over the last 24 months laid the foundation for the Company’s impressive 63% increase in software license sales in 2015. As reported last year, the Company executed an Institutional Share Placement Scheme and a Share Purchase Plan for retail shareholders. to rights Following this capital raise, the Company the acquired three software products. In August 2014, the Company acquired a non-exclusive right to the software code of the Mine 2-4D software design product from MineRP. In December 2014, we acquired the non-exclusive right to the software code of Geospatial management software from South African based software company PrimeThought. In June 2015, we In August 2015, we received notification that our ASX Global Industry Classification had been changed from “Commercial Services & Supplies” under the “Industrials” sector to “Software & Services” under the “Information reclassification sector. This Technology” accurately continued reflects transformation and evolution of our Company as predominantly an innovative provider of software solutions. This change will enable investors to better assess and evaluate RPM against comparable companies in the market. the The near term outlook of the Advisory business remains constrained, with no clear indicators that the market is about to turn any time soon. Because of this the Company has recognised a non-cash impairment of $2.5 million to the Goodwill of the Advisory division. The Board has resolved not to pay a dividend this financial year. I would again like to acknowledge the effort and commitment of our staff who continue to perform especially well during this challenging period. The Board thanks its shareholders for their ongoing support of the Company’s software strategy. The Board remains firmly of the opinion that these investments, along with the products that were released in 2015, will provide the growth engine for the business in 2016. Allan Brackin Chairman RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |2 For personal use only MANAGING DIRECTOR’S REPORT FINANCIAL RESULTS OPERATIONAL RESTRUCTURING The Company’s financial performance in 2015 was much improved on the back of a significant growth (63%) in software license fees. This increase resulted in an EBITDA for the year of $2.6 million (2014: loss $1 million) before restructure costs. Our software business now makes up 59% of the net revenue of our business (up from 48% in 2014). Demand for mining advisory services, desktop software products and coal gas exploration testing were again negatively impacted by weak commodity prices, lack of investment by mining companies and a restriction on capital to the industry. Revenue increased by 1% to $61.3 million (2014: $60.4 million) with net Advisory revenue decreasing by 22% to $20.1 million (2014: $25.8 million). Software license revenue finished the year at $15.9 million, 63% ahead of the previous year’s result (2014: $9.8 million). Software maintenance revenue increased by 9% to $13.7 million (2014: $12.6 million). Laboratory testing and consulting revenue from GeoGAS finished the year at $4.2 million (2014: $4.6 million) an 8% reduction from the previous year. The Advisory business was again impacted by the continuing contraction throughout the industry which was the overwhelming reason for a net loss after tax of $6.8 million (2014: $7.4 million), which staff restructuring costs of $1.3 million (2014: $1.1 million), premises restructuring costs of $3.4 million (2014: $0.7 million) and an Advisory goodwill write-down of $2.5 million (2014: $3.0 million). included Basic earnings per share was a loss of 3.9 cents per share (2014: 5.2 cents per share). During the year, the Company’s customers continued their drive to reduce capital and operating costs as quickly as possible. This directly impacted the revenue opportunities of their suppliers which of course included our Company. Our 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 resulting lower margins. in From a competitor standpoint, the 2015 financial year saw a number of mining advisory companies either reduced in size or close entirely. Many of the larger international Engineering, Procurement, and Construction Management (EPCM) companies severely cut back their mining advisory headcount as they moved back to their principal areas of expertise. Most of our competitors with coal advisory businesses have either been pared back to skeleton staff levels or have left the market completely. We are very pleased with the way the ethos of the Company has changed over the last three years, from a slow moving engineering focused business to a fast moving sales and marketing led business. cost the Company’s Over the last three years we have aggressively structure reduced wherever possible. In 2015, a number of fixed cost contracts came up for renewal (including software support and office leases). In each case we have reduced these fixed costs of the business having committed to either fewer RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |3 For personal use only MANAGING DIRECTOR’S REPORT users of the software or less office space or renegotiated the applicable rate. GROUP SALES AND MARKETING The work that we did in 2014 to build a sales team capable of winning larger software deals really paid off in 2015. This was evidenced by the 63% growth in Software License revenue year on year. During 2015, we filled in the regional management and software sales gaps nicely to enter the 2016 year with a full playing roster. We also continued our investment in product management assigning dedicated product managers to our new products. As a result of our successful move into the enterprise software domain, we have hired professional enterprise software project managers to manage the large global customer rollouts which we are currently undertaking. Our relationship with SAP continues to strengthen. We finalised and announced the signing of an SAP Application Development Cooperation Agreement during the year. We also had our software integrations with SAP certified. For many of our large customers, this certification was important given support of is often SAP environments outsourced. their corporate XERAS for Enterprise had a particularly good year as mining companies looked to bring and their technical mining solutions together so that they achieve better visibility of the financial impacts to changes in their operations. financial systems really seeing The Company’s new simulation products had a breakthrough year with many of our simulation customers the financial benefits of accurate operational simulation. As the number of companies using our simulation products grows, so does our understanding of the relationship between different variables within the mine which we then build back into our products. The growth in our simulation products was the key reason for the Company purchasing a copy of the FlexSim product code. Owning a copy of all of the software intellectual property gives us full control over both the direction and support of these products. SOFTWARE DEVELOPMENT The Software Development team had a fantastic 2015. They released two brand new products along with meaningful upgrades to all of our products. of We continued to extend the features and functions Product Framework (EPF) to such an extent that this platform can now be sold separately from our other products. Enterprise our We significantly increased the size of the development team during the last twelve months, firstly to support the 2015 software acquisitions and secondly to extend the functionality of the nine new products which we have released over the past 24 months. The new Product Development focus in 2016 will be centred on Coal. Twenty years ago we were the dominant provider of software to the Coal sector. However, over the last 6 to 7 years we have let competitors build niche products which in some cases have been extended across our customers’ businesses. to once again have By the end of the 2016 financial year, we intend the most competitive and innovative Coal applications in the market which we believe will set us up for renewed success in Coal in the coming years. EMPLOYEES It was another tough year for our Advisory team which again saw many of their friends and colleagues leave the business as we continued to downsize that division due to the reduction in available work. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |4 For personal use only MANAGING DIRECTOR’S REPORT The reduction in Advisory staff has been offset by the increase in the number of software sales and development staff. Whilst we will continue to carefully review the shape of our business, we are not expecting to see further headcount reductions in 2016 as we believe our current cost structures support our revenue projections. OUTLOOK We are expecting mining companies to continue productivity improvements in the year ahead. focus on to The GeoGAS business has now stabilised and we expect to see a return to slow and steady contribution improvement from that division. While we see little change in the demand for desktop products, we remain enthusiastic about the potential growth in our enterprise applications and simulation products. FY15 foundations of our enterprise saw products completed. FY16 will be about extending the number of mining companies that use our products and rejuvenating our reputation in coal. the structure in accelerated Our cost and sales investments development position us well for the year ahead. and software Richard Mathews Managing Director and Chief Executive Officer RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |5 For personal use only DIRECTORS’ REPORT Your Directors present their report on RungePincockMinarco Limited (the “Company”) and its subsidiaries (referred to hereafter as the “Group”) for the year ended 30 June 2015. 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) Software licensing, consulting, implementation and maintenance; Technical, advisory and training services to the resources industry; 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 Gross revenue in the 2015 financial year increased by 4% to $67.6 million (2014: $65.2 million). As shown below, the Group achieved strong growth in software license fees (63%) and software support revenue (9%) while Advisory revenue (-18%) and Laboratory services (-9%) declined again as miners limited their investments in exploration activity and project extensions while continuing to reduce their capital and operational costs. Software - Licence sales - Maintenance - Consulting Advisory GeoGAS Other Revenue Total Revenue Direct Costs Net Revenue 2015 $m 15.9 13.7 7.8 24.5 4.3 1.4 67.6 (5.6) 62.0 2014 $m 9.8 12.6 7.3 29.7 4.7 1.1 65.2 (4.8) 60.4 Change % 63% 9% 7% -18% -9% 27% 4% 17% 3% RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |6 For personal use only DIRECTORS’ REPORT Review and Results of Operations (Continued) 4. Reconciliation between IFRS and non-IFRS financial performance items used in the Directors Report is presented below: Net Revenue Operating Expenses EBITDA1 Accelerated depreciation – Brisbane Office Depreciation and Amortisation – other Restructure – staff Restructure – office leases Goodwill impairment costs Net Finance (costs)/income Loss before income tax Income tax benefit/(expense) Loss Earnings Per Share (cents per share) 2015 $m 62.0 (59.4) 2.6 (1.5) (2.6) (1.3) (1.9) (2.5) 0.3 (6.9) 0.1 (6.8) (3.9) 2014 $m 60.4 (61.4) (1.0) (0.2) (3.2) (1.0) (0.5) (3.0) (0.1) (9.1) 1.7 (7.4) (5.2) Change % 3% -3% n/a -19% n/a 24% 94% 8% 25% 1 Earnings before Interest, Tax, Depreciation, Amortisation, Impairment and Restructure The Group undertook further Advisory and GeoGAS restructuring during the year in response to declining revenues, with Advisory operating costs down 21% to $19.3 million (2014: $24.5 million) and GeoGAS operating costs down 17% to $2.9 million (2014: $3.5 million). Redundancy costs associated with these changes in the 2015 financial year were $1.3 million (2014: $1.0 million). While fewer employees were made redundant in 2015 those who left were generally remunerated higher and had been with the company longer than employees retrenched in previous years. The staff restructuring which was undertaken in FY15 will result in annualised savings in employee costs of $3.8 million. The Group reduced its accommodation costs significantly during the 2015 financial year. As a result of restructuring its office leases in Brisbane, Sydney and Perth the Company reported onerous lease obligations of $1.2 million, fit out impairments of $0.7 million and accelerated depreciation of $1.7 million. The annualised savings in premises costs as a result of these accommodation changes is $1.4 million. The Group has recognised a non-cash impairment charge of $2.5 million (2014: $3.0 million) against goodwill allocated to the Advisory division which reduced the carrying value of Advisory goodwill to $4.1 million. The impairment reflects continued difficult trading conditions for the Advisory division, with revenue down 18% in FY2015. The Group recorded a foreign exchange gain of $0.7 million (2014: loss $0.4 million). The fall in Advisory revenue was offset by the increase in software license fee revenue and reduction in operating costs which resulted in an EBITDA (Earnings before Interest, Tax, Depreciation, Amortisation, Restructure and Impairment) of $2.6 million (2014: loss $1.0 million). The Group had cash reserves of $22.6 million (2014: $7.5 million) and no bank debt at the end of the financial year. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |7 For personal use only DIRECTORS’ REPORT 4. Review and Results of Operations (Continued) Software Division The Software division provides mine scheduling, financial costing/budgeting and simulation software solutions to the mining industry. It also provides software consulting, implementation, training and support for these products. The Software division contributed 59% of Group revenue in 2015, up from 48% in the 2014 financial year. Two new software products were released during the 2015 financial year and the nine software products which were released in the 2014 financial year all received significant upgrades. These enterprise enabled applications contributed significantly to a 63% increase in software license revenue. Software sales in the traditionally strong fourth quarter of the year were $7.1 million, an increase from the prior comparative quarter of $3.3 million. These license sales occurred too late in the year to impact software consulting revenue which remained flat at $6.8 million (2014: $6.7 million) but will ensure a strong start to the year for the software consulting team. Recurring revenue for software support grew by 9% to $13.7 million (2014: $12.6 million). Interestingly most of our competitor mining advisory companies who use our software to provide services to the industry did not renew their annual maintenance as they either downsized their business or pulled out of the market altogether. While this approach had a negative impact on our support revenue it also reduced the Advisory competitiveness of these companies– particularly in Coal. 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. The Advisory division contributed 33% of Group revenue in 2015, down from 43% in the 2014 financial year. Revenue from Advisory services decreased by $5.6 million (22%) to $20.3 million (2014: $25.9 million). More than half of this reduction ($3.1 million) came from our Asian Advisory business which was negatively impact by the almost complete drop off in Chinese companies listing on either the Hong Kong or Singapore Stock Exchanges. Operating expenses for the division reduced by 21% to $19.3 million (2014: $24.5 million), primarily as a result of a 28% reduction in divisional staff numbers. This reduction in staff numbers resulted in an increase in the use of sub-contractors on Advisory projects throughout the year (2015: $4.1 million, 2014: $2.8 million). GeoGAS The GeoGAS business provides mine gas consulting and laboratory testing services to the coal industry on the East Coast of Australia. The GeoGAS division contributed 7% of Group revenue in 2015, down from 8% in the 2014 financial year. The Australian coal industry experienced further cutbacks in 2015 to exploration budgets and forward planning activity. Revenue was down by 8% to $4.2 million (2014: $4.6 million); however, the division increased its segment contribution to $1.3 million (2013: $1.1 million). Operating expenses Operating expenses decreased by 3% ($1.6 million) to $59.4 million during the year (2014: $61 million). RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |8 For personal use only DIRECTORS’ REPORT 4. Review and Results of Operations (Continued) The reduction in employee costs in both the Advisory ($3.6 million), GeoGAS ($0.5 million) and Corporate ($0.4 million) divisions was partly offset by the Software Development employee salary costs jumping by 30% ($1.6 million) to $7.1 million (2014: $5.5 million) as the Group hired additional software developers to support the three new software applications acquired during the year and its new product releases. Due to the large increase in software license sales during the year the Group paid out $3.5 million in commissions and bonuses to our software team and senior management (2014: 1.1 million). The Group also recorded $0.4 million in options expenses in 2015 (2014: $0.04 million). 5. Likely Future Developments - Business Strategies and Prospects for Future Financial Years Software Division In 2015 revenue from Software license fees increased by 63% as a result of increases in enterprise product sales (e.g. XERAS for Enterprise) and new product sales (e.g. XECUTE). Implementation of these solutions into our customers operating environments will provide additional product proof points which we believe will enhance our creditably and competitiveness. Acceptance of the Group’s enterprise products and innovative new products is lifting the quality of the conversations held with customers and prospects which is providing better insight into the requirements of the industry. We will again invest heavily in our enterprise architecture and commodity based scheduling products. 2016 will see the launch of a number of new simulation applications as well as release of our first mine design products which will initially be incorporated into our coal solutions. During 2015 we purchased three third party software products to fill product gaps in our product suite. This approach of identifying the leading products in specific product niches and then acquiring the rights to the products or the products themselves will continue in 2016. Advisory and GeoGAS The near term outlook for these businesses remains tough; however, longer term fundamentals remain positive. We believe both businesses will return positive contributions to the Group during 2016 on reduced revenue expectations. We are pleased with the structure and skills contained within both divisions and believe there is considerable upside available (without additional expenses being required) once commodity prices begin to rise and investment starts to return to the industry. 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 No matter or circumstance has arisen since 30 June 2015 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 2015 |9 For personal use only DIRECTORS’ REPORT 9. Information on Current Directors and Company Secretary Directors Allan Brackin Experience Chairman, Non-executive Director. Joined the Board in November 2011. Allan was formerly Director and Chief Executive Officer of Volante Group Limited, and prior to this, co-founder of Applied Micro Systems (AMS), Netbridge Systems Integration, Prion Technology Distribution, Quadriga Consulting Group and Affinity Recruitment. Qualifications: Bachelor of Applied Science. Other listed company directorships in last three years: Director of GBST Holdings Limited since 2005 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. Joined Pitcher Partners Brisbane (previously Johnston Rorke) in 1985, Managing Partner in 1992 – 2008 and again from 2014-to date. 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 Richard Mathews 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 Non-executive Director Member – Audit and Risk Committee Non-executive Director Member and Chairman – Audit and Risk Committee Member – HR and Remuneration Committee Executive Managing Director Member – HR and Remuneration 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, Graduate Diploma in Applied Corporate Governance from the Governance institute of Australia, Solicitor and Member of the Queensland Law Society and Associate Member of the Governance Institute of Australia (AGIA) and Chartered Institute of Secretaries (ACIS). RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |10 For personal use only 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 2015 and the number of meetings attended by each Director were: Full meetings of Board of Directors Audit & Risk Committee HR & Remuneration Committee Attended Held Attended Held Attended Held Allan Brackin Dr Ian Runge Ross Walker Richard Mathews 12 10 12 12 11. Insurance of Officers 12 12 12 12 4 3 4 - 4 4 4 - 1 - 1 1 1 - 1 1 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 29/11/20131 19/02/2014 31/03/2014 31/10/2014 03/03/20151 15/07/2015 Expiry date 29/11/2018 19/02/2019 31/03/2019 31/10/2019 03/03/2020 15/07/2020 Issue price of shares $0.68 $0.67 $0.73 $0.61 $0.59 $0.57 Number under option 1,713,000 350,000 250,000 100,000 5,002,000 250,000 7,665,000 1 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 section 20E of the Remuneration report. There are no Officers in the Company who are not also identified as key management personnel. 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 2015. 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 $0.57 165,600 RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |11 For personal use only 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 Details of the amounts paid or payable to the Company’s auditor and related practices of the auditor for audit and non-audit services provided during the year are set out below. The Board has considered the position and in accordance with advice received from the Audit Committee, is satisfied that the provision of non-audit services is compatible with the general standard of independence of auditors imposed by the Corporations Act 2001. BDO (QLD) Pty Ltd 2015 $ 2014 $ Preparation of Income tax return and other taxation services 5,600 - 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 30. 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 1 1 Includes 175,560 shares held by R Mathews as trustee under a bare trust arrangement for a third party. Options over ordinary shares RungePincockMinarco Limited Ordinary shares 1,064,978 16,335,484 925,000 7,847,003 - - - - 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. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |12 For personal use only DIRECTORS’ REPORT 20. Remuneration Report - Audited The remuneration report is set out under the following main headings: A. B. C. D. E. F. 20A. Principles used to determine the nature and amount of remuneration; Service agreements; Details of remuneration; Bonus and share-based compensation benefits; Equity instruments held by key management personnel; and Other transactions with key management personnel. 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 Executive General Managers of the Software Division and Advisory Division and the previous Corporate Services manager within the Group as having authority and responsibility for planning, directing and controlling all activities of the Group, directly or indirectly, during the 2015 financial year. The EGM Corporate Services manager ceased being a Key Management Personnel during the 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 2015 financial year the Committee did not use a remuneration consultant. The Group’s 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 (or equivalent pension 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. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |13 For personal use only DIRECTORS’ REPORT 20. Remuneration Report - Audited (Continued) 20A. Principles Used to Determine the Nature and Amount of Remuneration (Continued) 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 24 to the financial statements). The current long-term performance incentive structure was implemented in the 2008 year and amended in 2010, 2012 and 2013 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. Performance based compensation Year ended 30 June STI $’000 2011 2012 2013 2014 2015 75 56 - - 1,072 LTI $’000 - 68 (71) 33 90 Total $’000 75 124 (71) 33 1,162 EBITDA1 $’000 10,261 12,064 1,850 (945) 2,600 Dividends $’000 Share price $ 1,241 2,482 2,482 - - 0.37 0.35 0.47 0.58 0.56 1 Earnings before Interest, Tax, Depreciation, Restructure and Impairment costs Short-term Incentive Bonus 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’s has 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 Group. 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 Group financial result. In 2015 100% of the KMP’s STI incentive pool was based on the Company adjusted EBITDA performance. Allocation of this pool was based on both individual performance metrics and divisional results. Cash bonuses are paid, provided for or forfeited in the year to which they relate. The Board has assessed performance of the KMP’s against the EGMIP for the 2015 Financial Year and STI’s were awarded to the KMP as detailed below. Fixed Compensation R Mathews M Kochanowski J O’Neill C Halliday P Baudry 50% 83% 83% 50% 67% Variable Compensation 50% 17% 17% 50% 33% STI awarded STI forfeited 100% 100% 100% 100% 14% - - - - 86% RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |14 For personal use only DIRECTORS’ REPORT 20. Remuneration Report - Audited (Continued) 20A. Principles Used to Determine the Nature and Amount of Remuneration (Continued) Long-term Incentive Options were issued in the 2012, 2013, 2014 and 2015 financial years under the Company’s Employee Share Option Plan (ESOP) to KMP’s 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 from the date of grant, have vesting conditions linked to the holder maintaining employment with the Group over that period and are 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 vested in accordance with the table below if the Company’s average annual earnings per share (EPS) growth (Average EPS Growth) over the performance period comprising the 2012, 2013 and 2014 financial years (Performance Period), is at least 10 percentage points above the Average Australian Consumer Price Index (CPI) Increase for the corresponding period. EPS Vesting Condition Average EPS Growth over the Performance Period above Average Australian CPI Increase in the corresponding period % of Options which vest Less than 10 percentage points 0% 10 percentage points or more, but less than 20 percentage points 50% plus an additional 5% for each 1% increment 20 percentage points or more 100% The options issued in 2011 included 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% % of Options which vest if vesting condition satisfied 0% 4% or more, but less than 8% 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 50 th 20% or more Less than 50th percentile percentile or higher but lower th than 75 th 75 percentile or higher 40% 0% st 10% plus, from 51 to 75 th percentile percentile 0.4% for every 1 percentile 20% RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |15 For personal use only DIRECTORS’ REPORT 20. Remuneration Report - Audited (Continued) 20A. Principles Used to Determine the Nature and Amount of Remuneration (Continued) 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 31 December 2014. Both the Chairman’s and Non-executive Directors’ remuneration is inclusive of committee fees. 20B. Service Agreements Details of contracts with Directors and KMP of the Group are set out below. Notice Period Termination benefit Terms of agreement Base salary including superannuation A Brackin $100,000 Dr I Runge $80,000 R Walker $70,000 R Mathews $501,250 K Wallis $360,525 M Kochanowski $250,574 J O’Neill $250,574 C Halliday 1 $454,545 P Baudry 1 $402,763 1 Australian dollar equivalent, salaries of C Halliday are set and paid in US Dollars and P Baudry are set and paid in Chinese Yuan and Russian ruble. 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 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’s are also entitled to receive upon termination of employment their statutory entitlements of accrued annual and long service leave (where applicable), together with any superannuation benefits (where applicable). Compensation levels are reviewed each year to meet the principles of the remuneration 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 RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |16 For personal use only DIRECTORS’ REPORT 20. Remuneration Report - Audited (Continued) 20C. Details of Remuneration (Continued) 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 2015 financial year: Name Position Michael Kochanowski Chief Financial Officer James O’Neill Craig Halliday Group General Counsel and Company Secretary Executive General Manager – Software Division Philippe Baudry Executive General Manager - Advisory Division Kieran Wallis Executive General Manager – Corporate Services (ceased to be key management personnel during the year) 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. Short-term benefits Cash salary and fees STI cash bonus Non – monetary benefits 1 Post - employm ent benefits Termin- ation benefits Total Share- based payment Options Proportion of remun- eration perform- ance related $ $ $ $ $ $ $ % 2015 Directors A Brackin Dr I Runge R Walker R Mathews 100,457 80,000 75,000 467,293 722,750 - - - 500,000 500,000 Other Key Management Personnel M Kochanowski J O’Neill C Halliday P Baudry K Wallis2 227,798 229,358 421,259 422,718 213,653 1,514,786 2,237,536 Total 44,000 45,872 454,545 27,500 - 571,917 1,071,917 - - - 11,150 11,150 11,150 11,150 24,037 10,384 7,433 64,154 75,304 9,543 - - 35,000 44,543 21,641 21,789 22,978 - 20,297 86,705 131,248 - - - - - - - - - - - - - - 237,790 237,790 237,790 11,391 11,909 45,901 23,305 (2,753) 89,753 89,753 110,000 80,000 75,000 1,013,443 1,278,443 315,980 320,078 968,720 483,907 476,420 2,565,105 3,843,548 - - - 49.3 39.1 17.5 18.1 51.7 10.5 (0.6) 25.8 30.2 Value of options as propor- tion of remun- eration % - - - - - 3.6 3.7 4.7 4.8 (0.6) 3.5 2.3 1 Includes car park and health insurance 2 ceased to be key management personnel during the year The termination benefit includes contractual termination benefit and superannuation (where applicable). RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |17 For personal use only DIRECTORS’ REPORT 20. Remuneration Report - Audited (Continued) 20C. Details of Remuneration (Continued) Short-term benefits Cash salary and fees STI cash bonus Non – monetary benefits1 Post - employm ent benefits Termin- ation benefits Total Share- based payment Options Proportion of remun- eration perform- ance related $ $ $ $ $ $ $ % 2014 Directors A Brackin Dr I Runge R Walker R Mathews 109,840 80,000 80,000 471,373 741,213 - - - - - - - - 10,075 10,075 10,160 - - 29,878 40,038 - - - - - - - - - - Other Key Management Personnel M Kochanowski J O’Neill C Halliday2 P Baudry2 K Wallis 222,293 229,358 244,301 382,524 330,369 1,408,845 2,150,058 Total 1 Includes car park and health insurance - - - - - - - 10,075 10,075 12,674 8,498 10,075 51,397 61,472 18,056 21,216 9,723 - 30,156 79,151 119,189 2 Became Key Management Personnel during the year 2,148 1,335 32,500 (1,913) (1,211) 32,859 32,859 - - - - - - - 120,000 80,000 80,000 511,326 791,326 252,572 261,984 299,198 389,109 369,389 1,572,252 2,363,578 - - - - - 0.9 0.5 10.9 (0.5) (0.3) 2.0 1.3 Value of options as propor- tion of remun- eration % - - - - - 0.9 0.5 10.9 (0.5) (0.3) 2.0 1.3 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 24 in the financial report. Details of options over ordinary shares in the Company provided as remuneration to each director and each of the KMP’s 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 24 to the financial statements. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |18 For personal use only DIRECTORS’ REPORT 20. Remuneration Report - Audited (Continued) 20D. Bonuses and Share-based Compensation Benefits (Continued) Number of options granted during the year Number of options vested during the year 2 Value of options at grant date 1 $ - - - - - 44,640 50,220 22,320 122,760 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 - - - - 32,399 27,199 16,666 166,666 27,199 - - - - - 200,000 225,000 100,000 550,000 part of remuneration. 2 Options granted in 2010 vested and were either exercised or expired in September 2014 with an exercise price of $0.57. Options granted in November 2013 vested in November 2014 with an exercise price of $0.68 cents expiring in November 2018 and to-date no options in this grant have been exercised. Options granted under the ESOP plan carry no dividend or voting rights until the options vest, are exercised and converted to ordinary shares whereupon those ordinary shares carry dividend and voting rights consistent with all other ordinary shares of the Company. 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. 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: 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 03/03/2015 03/03/2015 03/03/2015 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 03/03/2016 03/03/2017 03/03/2018 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 03/03/2020 03/03/2020 03/03/2020 Exercise Price $ 0.57 0.57 0.57 0.40 0.55 0.55 0.68 0.68 0.68 0.59 0.59 0.59 Value per option at grant date $0.20 $0.19 $0.19 $0.12 $0.20 $0.10 $0.21 $0.23 $0.25 $0.19 $0.23 $0.25 RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |19 For personal use only DIRECTORS’ REPORT 20. Remuneration Report - Audited (Continued) 20D. Bonuses and Share-based Compensation Benefits (Continued) 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 24 to the financial statements. Year (FY) of grant Years in which option may vest Number of options granted Value of option at grant date 1 Number of options vested during the year Veste d % Number of options forfeited during the year Value at date of forfeiture 2 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 2015 2013 2014 2014 2015 2014 2015 2011 2012 2013 2014 2014 2015 - - - - 2013-2015 2015 2015 2015 2015-2017 2013-2015 2015 2015 2015 2015-2017 2016-2018 2015 2015 2015-2017 2016-2018 2015-2017 2016-2018 2013-2015 2015 2015 2015 2015-2017 2016-2018 - - - - 118,000 150,000 2,800 165,734 50,000 79,000 50,000 33,400 35,000 50,000 200,000 115,000 35,000 50,000 225,000 500,000 100,000 79,000 135,000 33,400 250,000 50,000 550,000 - - - - $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 $0.19 - $0.25 $0.20 $0.10 $0.21 - $0.25 $0.19 - $0.25 $0.21-$0.25 $0.19 - $0.25 $0.19 - $0.20 $0.12 $0.20 $0.10 $0.21 - $0.25 $0.19 - $0.25 - - - - 15,733 - - - 16,666 10,533 - - - 16,666 - - - 16,666 - 166,666 - 10,533 - - - 16,666 - - - - - 13% - - - 33% 13% - - - 33% - - - 33% - 33% - 13% - - - 33% - - - - - 21,466 150,000 2,800 165,734 - - 50,000 33,400 35,000 - - 115,000 35,000 - - - - - 135,000 33,400 250,000 - - - - - - $1,932 - - - - - - - - - - - - - - - - - - - - - - - - - 58% 100% 100% 100% - - 100% 100% 100% - - 100% 100% - - - - - 100% 100% 100% - - 1 The value at grant date calculated in accordance with AASB 2 Share-based Payment of options granted during the year as part of remuneration 2 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. 20E. Equity Instruments held by Key Management Personnel No shares were granted as compensation in 2015 (2014: 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: RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |20 For personal use only DIRECTORS’ REPORT 20. Remuneration Report - Audited (Continued) 20E. Equity Instruments held by Key Management Personnel (Continued) (i) Options Name Balance at the start of the year Granted as compensation Forfeited, exercised and expired Balance at the end of the year Vested and exercisable A Brackin Dr I Runge R Walker R Mathews K Wallis 2 M Kochanowski J O’Neill C Halliday P Baudry (ii) Ordinary Shares - - - - 400,000 200,000 200,000 500,000 500,000 - - - - - 200,000 225,000 100,000 550,000 - - - - (350,000) (150,000) (150,000) - (450,000) - - - - 50,000 250,000 275,000 600,000 600,000 - - - - 16,666 16,666 16,666 166,666 16,666 Balance at the start of the year Sold during the year Acquired during the year (Share Purchase Plan 5 Sept 2014) Exercise of Options Acquired during the year (on market) Balance at the end of the year Directors A Brackin Dr I Runge 927,528 16,310,484 - - 900,000 R Walker R Mathews 1 Other key management personnel of the Group K Wallis 2 M Kochanowski 7,052,003 17,552 69,371 - - - - 25,000 25,000 25,000 25,000 16,666 - - - - 10,000 31,600 2,000 2,216,574 J O’Neill C Halliday 1 P Baudry 1 Includes 175,560 shares held by R Mathews as trustee under a bare trust arrangement for C Halliday. 2 Number at the date K Wallis ceased being key management personnel. 182,976 31,600 4,000 8,333 - - - - - 112,450 - - 770,000 - - 4,000 274,541 - 1,064,978 16,335,484 925,000 7,847,003 44,218 100,971 10,000 2,491,115 222,909 Details of ordinary shares the Company provided as a result of the exercise of the options by key management personnel of the Group are set out below. No amounts were unpaid on any shares issued on the exercise of options. Date of exercise Number of shares issued Amount paid per share Value at exercise date 1 Name K Wallis M Kochanowski 30/09/2014 30/09/2014 10,000 31,600 P Baudry 1 the value of options was determined as the intrinsic value of the options on that date. 30/09/2014 31,600 $0.57 $0.57 $0.57 900 2,844 2,844 RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |21 For personal use only 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 $3,400 (2014: $9,100) for taxation and advisory services. Amount payable at year end is nil (2014: $3,740). During the year the Group employed services of Dr Ian Runge to present a training course to a client. The Group paid $5,000 for the services rendered to Runge International Pty Ltd, an entity associated with Dr Ian Runge. Aggregate amounts of each of the above types of other transactions with key management personnel of RungePincockMinarco Limited: Amounts recognised as direct cost Rechargeable expenses Amounts recognised as expense Professional fees 2014 Annual General Meeting (AGM) 5,000 5,000 3,400 3,400 - - 9,100 9,100 The Company’s 2014 remuneration report was unanimously adopted by show of hands at 2014 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: 12 August 2015 RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |22 For personal use only 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 P A GALLAGHER TO THE DIRECTORS OF RUNGEPINCOCKMINARCO LIMITED As lead auditor of RungePincockMinarco Limited for the year ended 30 June 2015, 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. P A Gallagher Director BDO Audit Pty Ltd Brisbane, 12 August 2015 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. For personal use only CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2015 Notes 2015 $’000 2014 $’000 Revenue from continuing operations Services Licence sales Software maintenance Other revenue Revenue Rechargeable expenses Net Revenue Expenses Amortisation Depreciation – Other Depreciation - Brisbane Office 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/(expense) Loss 36,428 15,944 13,701 1,558 67,631 (5,612) 62,019 (1,060) (1,275) (1,805) (44,287) (772) (3,146) (1,318) (5,948) (5,680) (2,112) (1,835) (69,238) (7,219) 523 (173) 350 (6,869) 112 (6,757) 41,462 9,779 12,570 1,420 65,231 (4,794) 60,437 (1,381) (1,588) (546) (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) 12 11 11 4 5 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |24 For personal use only CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2015 Notes 2015 $’000 2014 $’000 Loss Other comprehensive income Items that may be classified subsequently to profit or loss: Foreign currency translation differences Other comprehensive income / (loss), net of tax Total comprehensive income Earnings per share Basic earnings per share (cents) Diluted earnings per share (cents) 23 23 (6,757) (7,351) 42 42 (6,715) (3.9) (3.9) (341) (341) (7,692) (5.2) (5.2) The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |25 For personal use only CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015 Notes 2015 $’000 2014 $’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 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 27(c) 11 6 12 13 14 15 14 6 15 16 17 17 22,557 17,449 1,148 105 1,658 42,917 351 26 2,564 8,639 22,257 33,837 76,754 8,003 3,113 73 8,508 19,697 1,953 - 185 2,138 21,835 54,919 69,894 (3,857) (11,118) 54,919 7,521 11,372 2,700 669 1,464 23,726 386 26 6,361 7,949 23,257 37,979 61,705 5,111 4,951 22 9,501 19,585 1,034 69 982 2,085 21,671 40,034 48,678 (4,283) (4,361) 40,034 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |26 For personal use only CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2015 Contributed equity Reserves Retained profits Total equity $'000 48,678 $'000 (4,283) $'000 $'000 Balance at 1 July 2014 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 Balance at 30 June 2015 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 - 42 42 - 384 384 (4,361) (6,757) - (6,757) - - - - - - 21,216 - 21,216 69,894 (3,857) (11,118) 48,664 (3,986) - - - 14 - 14 - (341) (341) - 44 44 2,990 (7,351) - (7,351) - - - 40,034 (6,757) 42 (6,715) 21,216 384 21,600 54,919 47,668 (7,351) (341) (7,692) 14 44 58 Balance at 30 June 2014 48,678 (4,283) (4,361) 40,034 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |27 For personal use only CONSOLIDATED STATEMENT OF CASHFLOWS FOR THE YEAR ENDED 30 JUNE 2015 Notes 2015 $'000 2014 $'000 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Finance costs Restructure costs - Redundancies Restructure costs – Onerous leases Make good - Brisbane office Income taxes refunded Income taxes paid Net cash (outflow) / inflow from operating activities Cash flows from investing activities Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Payments for intangible assets Net cash outflow from investing activities Cash flows from financing activities Contributions of equity Transaction costs Net cash inflow/(outflow) from financing activities 14 21 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 66,055 (66,870) (815) 523 (173) (1,018) (1,453) (988) 846 (532) (3,610) (352) 4 (2,559) (2,907) 21,778 (796) 20,982 14,465 7,521 571 22,557 73,191 (70,350) 2,841 110 (219) (935) (510) - 530 (357) 1,460 (261) 170 (379) (470) 14 - 14 1,004 6,928 (411) 7,521 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |28 For personal use only 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. (b) Principles of Consolidation The consolidated financial statements incorporate the assets and liabilities of all entities controlled by RungePincockMinarco Limited as at 30 June 2015 and the results of all controlled entities for the year then ended. RungePincockMinarco Limited and its controlled entities together are referred to in this financial report as the “consolidated entity” or the “Group”. Subsidiaries are all entities (including 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. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |29 For personal use only NOTES ON THE FINANCIAL STATEMENTS 1. (c) Summary of Significant Accounting Policies (Continued) Income Tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses in the tax jurisdiction in which they arose. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. Tax consolidation legislation RungePincockMinarco Limited and its wholly owned Australian controlled entities have implemented the tax consolidation legislation. The head entity, RungePincockMinarco Limited, and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a standalone taxpayer in its own right. In addition to its own current and deferred tax amounts, RungePincockMinarco Limited also recognises the current tax liabilities or assets and the deferred tax assets arising from the unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable or payable to other entities in the Group. Details about the tax funding agreements are disclosed in note 5. Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |30 For personal use only NOTES ON THE FINANCIAL STATEMENTS 1. (d) Summary of Significant Accounting Policies (Continued) Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operational decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Managing Director. The assets and liabilities of the Group are regularly reviewed on a consolidated basis but are not regularly reported to the chief operating decision maker at a segment level. As such this information has not been included in the Operating Segment note 2. (e) i) Foreign Currency Translation Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). 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. iii) Group entities The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:    assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; income and expenses for each income statement and statement of comprehensive income are translated at daily exchange rates; and all resulting exchange differences are recognised in other comprehensive income. Fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entities and translated at the closing rate. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |31 For personal use only NOTES ON THE FINANCIAL STATEMENTS 1. (f) i) Summary of Significant Accounting Policies (Continued) Revenue Recognition Sale of licences Revenue from the sale of licences is recognised when the amount can be reliably measured and all significant risks and rewards of ownership have been transferred to the buyer. In most cases this coincides with the transfer of legal title or the passing of possession to the buyer. Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties. ii) Consulting Revenue from the provision of consulting services is recognised on an accruals basis in the period in which the consulting service is provided. Revenue from the provision of these services is calculated with reference to the professional staff hours incurred on each client assignment adjusted for any time that may not be recoverable. iii) Software maintenance When the outcome of a transaction involving software maintenance can be estimated reliably, revenue associated with the transaction is recognised on a straight-line basis over the service period. iv) Interest revenue Interest revenue is recognised using the effective interest method. It includes the amortisation of any discount or premium. (g) Trade Receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments are considered indicators that the trade receivable may be impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the allowance is recognised in other expenses in profit or loss. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss. (h) Work in Progress Work in progress represents costs incurred and profit recognised on client assignments and services that are in progress at balance date. Work in progress is valued at net realisable value after providing for any foreseeable losses. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |32 For personal use only NOTES ON THE FINANCIAL STATEMENTS 1. (i) Summary of Significant Accounting Policies (Continued) Investments and Other Financial Assets Equity investments that are held for trading are measured at fair value through profit or loss. For all other equity investments, the group can make an irrevocable election at initial recognition of each investment to recognise changes in fair value through other comprehensive income (OCI) rather than profit or loss. All current investments in equity investments are classified as at fair value through other comprehensive income. Such investments are initially and subsequently measured at fair value, with the initial fair value being cost. Unrealised gains or losses on investments in an equity instrument are recognised in a reserve until the investment is sold, collected or otherwise disposed of, at which time the cumulative gain or loss is transferred to the Asset Realisation Reserve. The Company derecognises an investment in an equity instrument when it is sold or it transfers the investment and the transfer qualifies for derecognition in accordance with AASB 9. Upon derecognition, unrealised gains/losses net of tax relating to the investment are transferred from the revaluation reserve to the realisation reserve. Interest bearing investments are recognised initially at fair value and are subsequently measured at amortised cost. Amortised cost is calculated with any difference between cost and redemption value being recognised in the statement of comprehensive income over the period of the investment on an effective interest basis. (j) Leases Leases of property, plant and equipment, where the Group as lessee has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long-term borrowings. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the asset’s useful life and the lease term. Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the profit or loss on a straight line basis over the period of the lease. Lease income from operating leases where the Group is a lessor is recognised in income on a straight line basis over the lease term. (k) Business Combinations The acquisition method of accounting is used to account for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |33 For personal use only NOTES ON THE FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies (Continued) (k) Business Combinations (Continued) Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss. (l) Impairment of Assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. (m) Cash and Cash Equivalents For cash flow statement presentation purposes, cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily converted to known amounts of cash and which are subject to an insignificant risk of changes in value and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the consolidated statement of financial position. (n) Property, Plant and Equipment Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight line basis to write off the net cost of each item of property, plant and equipment over its estimated useful life to the consolidated entity, or in case of lease hold improvements, the shorter lease term. Estimates of remaining useful lives are made on a regular basis for all assets. The estimated useful lives for plant and equipment is ranging between 2 and 20 years. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |34 For personal use only NOTES ON THE FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies (Continued) (n) Property, Plant and Equipment (Continued) 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. iii) Patents and trademarks Costs associated with patents and trademarks are expensed as incurred. iv) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary/business at the date of acquisition. Goodwill on acquisition is included in intangible assets. Goodwill is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses. Goodwill is allocated to cash generating units for the purposes of impairment testing. The allocation is made to those cash generating units or groups of cash generating units that are expected to benefit from business combination in which goodwill arose, identified according to operating segments or components of operating assets (note 2). (p) Trade and Other Payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |35 For personal use only NOTES ON THE FINANCIAL STATEMENTS 1. (q) Summary of Significant Accounting Policies (Continued) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates. Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. (r) Borrowing Costs Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed. (s) i) Employee Benefits Short term obligations Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave and long service leave is recognised in the provision for employee benefits. Other long-term employee benefit obligations The liability for long service leave and other benefits which is not expected to be settled within 12 months after the end of the period in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |36 For personal use only NOTES ON THE FINANCIAL STATEMENTS 1. (s) ii) Summary of Significant Accounting Policies (Continued) Employee Benefits (Continued) 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 24. The fair value of options granted under the ESOP is recognised as an employee benefit expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted, which includes any market performance conditions, but excludes the impact of any service and non-market performance vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity. (t) Value Added Taxes (Including Goods and Services Tax) Revenues, expenses and assets are recognised net of the amount of Value Added Tax (VAT), except where the amount of VAT is not recoverable from the relevant tax authority. In these circumstances the VAT is recognised as part of the cost of acquisition of the asset or as part of the item as expense. Receivables and payables are stated with the amount of VAT included. The net amount of VAT recoverable from, or payable to, the relevant tax authority is included as a current asset or liability in the consolidated statement of financial position. Cash flows are presented on a gross basis. The VAT components of the cash flows arising from investing and financing activities which are recoverable from, or payable to, the relevant tax authority are classified as operating cash flows. (u) Contributed Equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |37 For personal use only NOTES ON THE FINANCIAL STATEMENTS 1. (v) i) Summary of Significant Accounting Policies (Continued) 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. (y) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. (z) Critical Accounting Estimates and Significant Judgments The preparation of the financial report in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the accounting policies. The notes in the financial statements set out areas involving a higher degree of judgment or complexity, or areas where assumptions are significant to the financial report such as:    intangible assets, including goodwill (note 12), impairment of receivables (note 8, 22(a) 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. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |38 For personal use only NOTES ON THE FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies (Continued) (aa) Parent Entity Financial Information The financial information for the parent entity, RungePincockMinarco Limited, disclosed in note 26 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 2015, are as follows: (i) IFRS 15 Revenue from Contracts with Customers This standard and its consequential amendments are currently applicable to annual reporting periods beginning on or after 1 January 2018. This standard requires recognised revenue to depict the transfer of promised goods or 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. This means that revenue will be recognised when control of goods or services is transferred, rather than on transfer of risks and rewards as is currently the case under IAS 18 Revenue. The Group has not yet evaluated the impact adoption of this standard will have (cc) New and amended standards adopted by the Group The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 July 2014:  AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets; and  AASB 2014-1 Amendments to Australian Accounting Standards 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. Early adoption of standards The Group has not elected to apply any pronouncements before their operative date. 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 (support), 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 (e.g. 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. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |39 For personal use only NOTES ON THE FINANCIAL STATEMENTS 2. Operating Segments (Continued) Information about reportable segments 2015 2014 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 Inter-segment expenses Rechargeable expenses Net revenue Total Expenses 36,803 1,739 38,542 (1,163) (1,200) 36,179 25,223 1,171 26,394 (1,864) (4,250) 20,280 4,222 125 4,347 (8) (162) 4,177 66,248 3,035 69,283 (3,035) (5,612) 60,636 29,215 1,281 30,496 (785) (868) 28,842 30,224 4,669 802 31,026 (1,281) (3,825) 25,921 4,669 (17) (101) 4,551 64,108 2,083 66,191 (2,083) (4,794) 59,314 (19,253) (19,389) (2,929) (41,571) (17,634) (24,528) (3,480) (45,642) Software Development Segment profit/(loss) (7,734) 9,192 - 891 - 1,248 (7,734) 11,331 (5,918) 5,290 - - (5,918) 1,393 1,071 7,754 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 Restructure and impairment costs Depreciation and amortisation Net finance costs Unallocated income Loss before income tax Income tax benefit Net loss Geographical Information 2015 $'000 2014 $'000 11,331 7,754 713 (4,454) (5,659) (5,680) (4,140) 350 670 (6,869) 112 (6,757) (363) (3,859) (5,601) (4,459) (3,515) (134) 1,123 (9,054) 1,703 (7,351) Segment revenue is based on the geographical location of customers and segment assets are based on the geographical location of the assets. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |40 For personal use only NOTES ON THE FINANCIAL STATEMENTS 2. Operating Segments (Continued) 2015 2014 Revenues $’000 Non-current assets1 $’000 Revenues $’000 Non-current assets1 $’000 Australia Asia Americas Africa & Europe Operating Segment Unallocated Revenue Foreign Exchange Gains Reported 1Excludes financial instruments and deferred tax assets. 3. Loss Before Income Tax 26,542 14,388 14,285 11,033 66,248 670 713 24,472 361 154 211 25,198 - - 20,993 18,735 15,171 9,209 64,108 1,123 - 27,517 424 1,787 302 30,030 - - 67,631 25,198 65,231 30,030 Loss before income tax includes the following specific expenses / (income) Defined contributions superannuation expense – related party Rental expense relating to operating leases - Minimum lease payments Foreign exchange (gains) / losses 4. Restructure and Impairment Costs 2015 $'000 2014 $'000 2,118 6,900 (713) 2,510 6,649 363 In 2015 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 – Sydney Office Fitout Other Restructure costs: Employment termination costs Onerous lease obligations Other closure costs 2,500 711 3,211 1,206 1,203 60 2,469 5,680 3,000 - 3,000 933 488 38 1,459 4,459 RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |41 For personal use only NOTES ON THE FINANCIAL STATEMENTS 5. Income Tax Benefit 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% (2014: 30%) Tax effect of amounts which are not taxable/(deductible) in calculating taxable income: Attributed income Non-deductible expense/non-assessable income Research and development deduction Unutilised foreign tax credits Unrecognised deferred tax assets Difference in overseas tax rates Foreign Exchange movements Over/(under) provision in prior years Income tax benefit Tax consolidation legislation 2015 $'000 2014 $'000 (556) 603 65 112 (6,869) 2,061 (19) 377 400 (167) (2,879) (227) 18 256 65 112 (360) 1,415 648 1,703 (9,054) 2,716 (7) (925) 351 (11) (1,062) 1,062 (7) 648 1,703 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 liabilities 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. Completion of restructure in Australia significantly lowers the Company’s cost base and it is expected to have taxable profits in the future. 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 2015 |42 For personal use only NOTES ON THE FINANCIAL STATEMENTS Deferred Tax Assets and Liabilities 6. 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 Intangibles Work in progress Property, plant and equipment Prepayments Unrealised foreign exchange Other deferred tax liabilities Deferred tax assets Deferred tax liabilities Net Deferred 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 Unrecognised deferred tax assets Unrecognised gross temporary differences 2015 $'000 195 1,846 611 4,628 490 162 259 3 1,319 (36) (39) (234) (528) (37) 8,639 - 8,639 7,880 603 70 234 - (147) 8,639 2014 $'000 277 1,228 1,350 5,398 465 29 112 3 (310) (27) (389) (212) (15) (29) 7,949 (69) 7,880 5,907 1,415 - (61) 76 543 7,880 298 3,124 485 1,811 5,719 23,428 270 877 485 1,086 2,718 10,494 The group has derecognised deferred tax assets in its subsidiaries located in China, Russia, Chile, Brazil and USA because it is not probable that sufficient future taxable profit will be available. Foreign tax credits will expire in 2017. Capital losses do not expire, however, it is not probable that the Group would generate capital gains to utilise the benefit. Deductible temporary differences for have not been recognised because it is not probable that sufficient future taxable profit will be available. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |43 For personal use only 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 9. Work in Progress Work in progress 10. Other Assets Prepayments 11. Property, Plant and Equipment Plant and equipment - at cost Less: accumulated depreciation Balance at 1 July Exchange differences Additions Impairment Disposals Depreciation* Balance at 30 June Note 2015 $'000 2014 $'000 8,939 13,617 22,557 19,356 (1,909) 17,447 2 17,449 351 351 4,935 2,586 7,521 12,500 (1,336) 11,164 208 11,372 386 386 1,148 2,700 1,658 1,464 6,652 (4,088) 2,564 6,361 52 352 (711) (411) (3,080) 2,564 17,766 (11,405) 6,361 8,200 (26) 672 - (351) (2,134) 6,361 4 * Depreciation charge includes accelerated depreciation for the Brisbane office fitout and make good of $1,487,000 (2014: $227,000) following a decision by the Company to move its Brisbane Head office. Total depreciation for the Brisbane office was $1,805,000 (2014: $546,000 and 2013: $319,000). RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |44 For personal use only 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 2015 $'000 2014 $'000 5,459 (2,141) 3,318 4,598 (4,191) 407 - - - 24,764 (6,232) 18,532 22,257 5,756 (4,432) 1,324 7,001 (6,100) 901 1,494 (1,494) - 24,032 (3,000) 21,032 23,257 Software For Sales to Customers 1 At Cost $'000 Accumulated amortisation $'000 Software For Internal Use Goodwill Total At Cost $'000 Accumulated amortisation Carrying Value Carrying Value $'000 $'000 $'000 Balance at 1 July 2014 Additions Exchange differences Write-off2 Impairment 3 Amortisation (2,766) 2,766 (2,494) 2,494 5,756 2,469 - - - (4,432) 7,001 (6,100) 21,032 - - 90 1 - - - - - - (475) (2,141) - - 4,598 - (2,500) (585) (4,191) - 18,532 23,257 2,559 1 - (2,500) (1,060) 22,257 Balance at 30 June 2015 5,459 Balance at 1 July 2013 Additions Disposal Exchange differences Impairment 2 Amortisation 5,624 132 - - - Balance at 30 June 2014 5,756 (4,040) 6,755 (5,072) 24,066 27,333 - - - - (392) (4,432) 219 (3) 30 - - - - (39) - (989) - - (34) (3,000) - 7,001 (6,100) 21,032 351 (3) (43) (3,000) (1,381) 23,257 1 Software consists of capitalised development costs. 2 Write-off includes fully amortised software acquired by the group and is no longer utilised in internal use or external sales. 3 The carrying amount of intangible assets has been reduced to its recoverable amount through recognition of an impairment loss against goodwill. This loss has been disclosed in note 4. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |45 For personal use only NOTES ON THE FINANCIAL STATEMENTS 12. (a) Intangible Assets (Continued) Impairment Tests for Goodwill Goodwill is allocated to the Group's cash generating units (CGUs) according to business unit. A segment level summary of the goodwill is presented below. Advisory Division Software Division GeoGAS 2015 $'000 4,055 9,556 4,921 18,532 2014 $'000 6,555 9,556 4,921 21,032 (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: Margin1 Growth Rate2 Discount Rate3 Advisory Division Software Division 2015 7% 50% 2014 14% 49% 2015 2.5% 2.5% 2014 2.5% 2.5% 2015 15% 15% 2014 17% 17% 35% GeoGAS 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 3.0% 2.5% 21% 13% 15% 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. (c) Impairment charges Based on the above assumptions and calculations, an impairment of $2,500,000 (2014: $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 Impairment calculations for GeoGAS and Software divisions are not sensitive to major changes in key assumptions. Sensitivity of value in use calculations for the Advisory Division would result in further impairment summarised below: RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |46 For personal use only NOTES ON THE FINANCIAL STATEMENTS 12. (d) Intangible Assets (Continued) Impact of possible changes in key assumptions (Continued) Assumption Margin Growth Rate Discount Rate 13. Trade and Other Payables Current Trade payables Other payables and accruals Provisions 14. Current Make good obligations * Onerous sublease contracts Employee benefits Non-current Make good obligations Onerous sublease contracts Employee benefits * During the year the Group settled in cash its make good obligations for the Brisbane Head office. 15. Other Liabilities Current Unearned income - software maintenance Unearned income - consulting and other Property lease incentives and straightlining Non-current Change Basis points Impact on impairment $'000 -100 -100 +100 104 796 1,043 2015 $'000 2014 $'000 2,507 5,496 8,003 31 620 2,462 3,113 343 897 713 1,953 6,787 1,691 30 8,508 2,066 3,045 5,111 1,105 1,242 2,604 4,951 353 - 681 1,034 6,053 2,515 933 9,501 Property lease incentives and straightlining 185 983 RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |47 For personal use only NOTES ON THE FINANCIAL STATEMENTS 16. Contributed Equity Share capital 2015 Number 2014 Number 2015 $'000 2014 $'000 Ordinary shares - fully paid 177,653,062 141,380,950 69,894 48,678 Movements in Share Capital: Date 30/06/2013 Balance Exercise of employee options at $0.57 per share Costs of issue 30/06/2014 Balance Placement at $0.60 per share Costs of issue Share Purchase Plan at $0.60 per share Costs of issue Exercise of Options at $0.57 per share Costs of issue 30/06/2015 Balance Ordinary Shares Ordinary shares Number $’000 141,345,216 48,664 35,734 - 141,380,950 35,000,000 1,106,512 - 165,600 20 (6) 48,678 21,000 (509) 664 (30) 94 (3) 177,653,062 69,894 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 24. 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. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |48 For personal use only NOTES ON THE FINANCIAL STATEMENTS 16. Contributed Equity (Continued) 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 2015 and 30 June 2014 were as follows: Total borrowings, trade and other payables Less: cash and cash equivalents Net (cash) / debt Total equity Total capital Gearing ratio 17. 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 2015 $'000 8,003 (22,557) (14,553) 54,919 40,366 n/a 2014 $'000 5,111 (7,521) (2,410) 40,034 37,624 n/a 1,125 (1,846) (1,601) 18 (1,553) (3,857) 741 (1,888) (1,601) 18 (1,553) (4,283) 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 this reserve. (ii) Foreign currency translation Exchange differences arising on translation of the foreign controlled entities are taken to the foreign currency translation reserve, as described in accounting policy note 1(e). (iii) Financial assets revaluation reserve Changes in the fair value of investments are recognized in equity securities in other comprehensive income. These changes are accumulated in a separate reserve within equity. The entity has a policy on transferring amounts from this reserve to an asset realization reserve. (iv) Reserve arising from an equity transaction Arose from the acquisition of an additional interest in the controlled entity, MRM Mining Services (Pty) Ltd. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |49 For personal use only NOTES ON THE FINANCIAL STATEMENTS 17. Reserves and Retained Profits (Continued) Movement in Reserves Share-based payments 2015 $'000 2014 $'000 Foreign Currency Translation 2015 $'000 2014 $'000 741 384 - - 1,125 697 44 - - 741 (1,888) - - 42 (1,846) (1,547) - - (342) (1,889) Balance at 1 July Options expensed Income tax Foreign currency translation Balance at 30 June There were no other movements in reserves in 2015 and 2014. Retained Profits Balance at 1 July Net profit / (loss) for the year Balance at 30 June 18. Dividends Fully paid ordinary shares 2015 $'000 2014 $'000 (4,361) (6,757) (11,118) 2,990 (7,351) (4,361) Cents per share Total 2015 Cents 2014 Cents 2015 $'000 2014 $'000 - - - - No dividend was declared in respect of the current financial year. 19. Remuneration of Auditors During the year the following fees were paid or payable for services provided by the auditors of the Group, its related entities, its network forms and unrelated firms. Audit services - Audit and review of the financial reports: 2014 2015 Auditor of the parent entity: BDO Audit Pty Ltd Auditors of subsidiaries: PKF Malaysia (unrelated firm) BDO South Africa (network firm) BDO Hong Kong (network firm) BDO Indonesia (network firm) Unistar – Mongolia (unrelated firm) $ $ 159,445 157,000 - 25,335 21,006 17,250 4,423 977 21,336 17,787 14,650 3,058 227,459 214,808 During the year the company related to the Auditor of the parent entity BDO (QLD) Pty Ltd provided the following services and received the following fees: Preparation of Income tax return and other taxation services 5,600 - RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |50 For personal use only NOTES ON THE FINANCIAL STATEMENTS 20. (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: 2015 $'000 2014 $'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 2,651 6,807 255 9,713 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 194 164 358 21. Reconciliation of Net Profit to Net Cash Inflow / (outflow) from Operating Activities Net loss Depreciation and amortisation Disposal of property, plant and equipment Impairment Deferred tax recognised in equity 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 (6,757) 4,140 (362) 3,211 (234) 571 384 (6,043) 564 (690) 1,552 (196) 2,892 86 (1,791) 51 (69) (919) (3,610) 6,470 9,614 1,312 17,396 174 - 174 (7,351) 3,515 90 3,000 - 247 44 4,541 532 (1,806) (702) (38) (753) 734 94 (89) (167) (431) 1,460 RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |51 For personal use only NOTES ON THE FINANCIAL STATEMENTS 22. 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 1 Loans and receivables 2 At amortised cost (a) Credit Risk 2015 $'000 22,557 17,449 40,006 2014 $'000 7,521 11,758 19,279 8,003 5,111 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. 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. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |52 For personal use only NOTES ON THE FINANCIAL STATEMENTS 22. (a) Financial Risk Management (Continued) Credit Risk (Continued) The Group assesses the credit risk by the country where the debt is located. The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was: Australia Americas Asia Africa and Europe 2015 $'000 2014 $'000 9,058 3,908 2,010 1,976 3,866 3,887 2,515 1,601 17,449 11,372 As at 30 June 2015, trade receivables of $5,148,000 (2014: $4,815,000) 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 Unearned Income moved to provision Impairment loss recognised Effect of foreign exchange Balance at 30 June 1,154 1,412 2,694 5,148 1,336 (107) 381 193 106 1,909 1,358 1,247 2,210 4,815 602 (12) (78) 892 (68) 1,336 The provision for impairment of trade receivables in 2015 and 2014 relates to receivables that are past due for more than 90 days. (b) Liquidity Risk 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 22(c) below. Contractual maturities of the Group’s financial liabilities, including interest thereon, are as follows: RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |53 For personal use only NOTES ON THE FINANCIAL STATEMENTS 22. (b) 2015 Financial Risk Management (Continued) Liquidity Risk (Continued) Carrying amount Contractual cash flows 6 mths or less 6-12 mths 1-2 years 2-5 years $'000 $'000 $'000 $'000 $'000 $'000 Trade and other payables 8,003 8,003 8,003 2014 Trade and other payables 5,111 5,111 5,111 - - - - - - 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 2015 and 2014 the Group had not entered into any derivative contracts to hedge these exposures. The Group does not engage in any significant transactions which are speculative in nature. As a multinational corporation, the Group maintains operations in foreign countries and as a result of these activities, the Group is exposed to changes in exchange rates which affect its results of operations and cash flows. The Group’s exposure to foreign currency risk at balance date expressed in Australian Dollars was as follows: 2015 Cash and deposits Trade and other receivables Trade and other payables Net balance sheet exposure 2014 Cash and deposits Trade and other receivables Trade and other payables Net balance sheet exposure USD $’000 CAD $’000 ZAR $’000 Other $’000 Total $’000 7,226 4,548 (715) 11,059 2,919 4,672 (661) 6,930 377 241 (42) 576 334 767 (94) 1,007 1,229 846 (228) 1,847 578 1,462 (396) 1,644 827 2,328 (886) 2,269 1,417 573 (729) 1,261 9,659 7,963 (1,871) 15,751 5,248 7,474 (1,880) 10,842 A 10 percent strengthening of the Australian dollar against the above currencies at 30 June 2015 based on assets and liabilities at 30 June 2015 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 2014. 2015 2014 Equity $'000 Profit/(Loss) $'000 Equity $'000 Profit/(Loss) $'000 (547) (885) (966) (118) RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |54 For personal use only NOTES ON THE FINANCIAL STATEMENTS 22. (c) Financial Risk Management (Continued) Market Risk (Continued) A 10 percent weakening of the Australian dollar against the above currencies at 30 June 2015 would have had equal but opposite effect on the above currencies to the amounts shown above. Interest rate risk Details of the Group’s borrowing facilities are presented below. Borrowing facilities Currency Nominal interest rate 2015 2014 Maturity Facility $’000 Utilised $’000 Facility $’000 Utilised $’000 Bank overdraft AUD 7.04% n/a Loans and Borrowings Other facilities Bank guarantee Bank guarantee AUD AUD 2.35% 2.50% n/a n/a - - 1,800 - - - 912 - 5,000 5,000 - 3,112 - - - 1,633 In 2015 bank guarantees were secured by the Group’s term deposits. The Australian dollar loan facilities including the bank guarantee in 2014 were secured by a first registered equitable mortgage over the Group’s assets, including uncalled capital. 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. 23. Earnings Per Share Basic earnings per share Diluted earnings per share Earnings used in Calculating Earnings Per Share Profit / (loss) attributable to the ordinary equity holders used in calculating earnings per share Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share Dilutive options Weighted average number of ordinary shares used as the denominator in calculating diluted earnings per share 2015 Cents (3.9) (3.9) 2015 $’000 2014 Cents (5.2) (5.2) 2014 $’000 (6,757) (7,351) 174,439 141,353 - 174,439 141,353 RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |55 For personal use only NOTES ON THE FINANCIAL STATEMENTS 24. Share Based Payments Tax Exempt Share Plan 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 the $1,000 Share Purchase Plan in 2015 or 2014. 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. 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 Group. 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). RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |56 For personal use only NOTES ON THE FINANCIAL STATEMENTS 24. Share Based Payments (Continued) 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. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |57 For personal use only NOTES ON THE FINANCIAL STATEMENTS 24. Share Based Payments (Continued) The vesting conditions attached to the options are set out in the Remuneration Report (20A) of the Directors’ Report. The number and weighted average exercise prices of share options are as follows: Grant date Vesting Expiry Exercise Number Granted Forfeited Exercised Weighted Number date date Price beginning $ of year at end of year Average Share Price at the exer- cise date (60,538) (70,672) (32,532) (53,864) (36,265) (41,064) 0.66 0.66 0.66 2015 Options granted to management 14/12/10 31/08/12 30/09/14 14/12/10 31/08/13 30/09/14 14/12/10 31/08/14 30/09/14 29/05/12 1/09/14 31/08/16 3/05/13 1/09/14 31/08/16 26/08/13 1/09/14 31/08/16 29/11/13 30/11/14 29/11/18 29/11/13 30/11/15 29/11/18 29/11/13 30/11/16 29/11/18 19/02/14 19/02/15 19/02/19 19/02/14 19/02/16 19/02/19 19/02/14 19/02/17 19/02/19 31/03/14 31/03/15 31/03/19 31/03/14 31/03/16 31/03/19 31/03/14 31/03/17 31/03/19 31/10/14 31/10/15 31/10/19 31/10/14 31/10/16 31/10/19 31/10/14 31/10/17 31/10/19 3/03/15 3/03/16 3/03/20 3/03/15 3/03/17 3/03/20 3/03/15 3/03/18 3/03/20 0.57 0.57 0.57 0.4 0.55 0.55 0.68 0.68 0.68 0.67 0.67 0.67 0.73 0.73 0.73 0.61 0.61 0.61 0.59 0.59 0.59 131,210 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 - - - - - - - - - - - - - - - - - - 33,332 33,334 33,334 - 1,692,308 - 1,692,308 - 1,692,384 (1,796,000) (578,600) (1,539,734) (5,000) (10,000) (10,000) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Total 6,552,269 5,177,000 (4,068,669) (165,600) Weighted average exercise price 0.56 0.59 0.49 0.57 - - - - - - 575,987 571,004 571,009 116,666 116,666 116,668 83,333 83,333 83,334 33,332 33,334 33,334 - - - - - - - - - - - - - - - - 1,692,308 - 1,692,308 - 1,692,384 - 7,495,000 0.62 RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |58 For personal use only NOTES ON THE FINANCIAL STATEMENTS 24. Share Based Payments (Continued) Grant Date Vesting Expiry Exercise Number Granted Forfeited Exercised Weighted Number date date Price beginning $ of year Average at end Share Price of year at the exer- cise date 2014 Options granted to management 14/12/10 31/08/12 30/09/14 14/12/10 31/08/13 30/09/14 14/12/10 31/08/14 30/09/14 29/05/12 1/09/14 31/08/16 3/05/13 1/09/14 31/08/16 26/08/13 1/09/14 31/08/16 29/11/13 30/11/14 29/11/18 29/11/13 30/11/15 29/11/18 29/11/13 30/11/16 29/11/18 19/02/14 19/02/15 19/02/19 19/02/14 19/02/16 19/02/19 19/02/14 19/02/17 19/02/19 31/03/14 31/03/15 31/03/19 31/03/14 31/03/16 31/03/19 31/03/14 31/03/17 31/03/19 0.57 0.57 0.57 0.4 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 - - (29,068) (6,666) (15,733) (160,000) - - - - - - - - - - - - - - - - - - - - - - - - Total 2,881,002 3,882,734 (175,733) (35,734) Weighted average exercise price 0.45 0.63 0.42 0.57 0.61 0.61 - 131,210 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 0.56 - The weighted average remaining contractual life of share options outstanding at the end of the period was 3.3 years (2014: 2.9 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. 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). RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |59 For personal use only NOTES ON THE FINANCIAL STATEMENTS 24. Share Based Payments (Continued) The model inputs for options granted during the 2015, 2014, 2013, 2012 and 2011 financial years included: Options with market hurdles Dec Dec Nov 2010 2010 2012 with non-market hurdles May 2013 Aug 2013 Nov Feb Mar Oct Mar 2013 2014 2014 2014 2015 Fair value of share options at grant date: Option vesting date 31/08/2012 31/08/2013 31/08/2014 1/09/2014 1/09/2014 1/09/2014 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 31/10/2015 31/10/2016 31/10/2017 3/03/2016 3/03/2017 3/03/2018 $0.20 $0.19 $0.19 $0.24 $0.25 $0.24 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $0.12 - - - - - - - - - - - - - - - - - - - - - $0.20 - - - - - - - - - - - - - - - - - - - - - $0.10 - - - - - - - - - - - - - - - - - - - - - $0.21 $0.23 $0.25 - - - - - - - - - - - - - - - - - - - - - $0.22 $0.25 $0.27 - - - - - - - - - - - - - - - - - - - - - $0.24 $0.27 $0.30 - - - - - - - - - - - - - - - - - - - - - 0.21 0.25 0.27 - - - - - - - - - - - - - - - - - - - - - 0.19 0.23 0.25 Assumptions: Share price Exercise price Expected volatility (weighted average volatility) Option weighted average life Expected dividends Risk-free interest rate1 $0.57 $0.57 $0.57 $0.57 $0.40 $0.40 $0.60 $0.55 $0.50 $0.68 $0.65 $0.72 $0.60 $0.56 $0.55 $0.68 $0.67 $0.73 $0.61 $0.59 70% 70% 50% 50% 37.50% 40% 50% 50% 55% 55% 3.8 years 5% 3.8 years 5% 3.8 years 6% 3.3 years 3.50% 3 years 4% 5 years 0% 5 years 0% 5 years 0% 5 years 0% 5 years 0% 5.31% 5.31% 2.60% 2.50% 2.75% 3.44% 3.42% 3.44% 2.81% 1.84% 1 based on government bonds RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |60 For personal use only NOTES ON THE FINANCIAL STATEMENTS 24. Share Based Payments (Continued) The expected price volatility is based on the historic volatility compared to that of similar listed companies and the remaining life of the options. This has been adjusted to take into consideration the recent extreme market movements using a mean reversion tendency of volatilities (the concept of volatility returning to normal levels after going to an extreme). Employee Benefits expense Share-based payment expense recognised during the financial year Options issued under employee option plan 2015 $’000 2014 $’000 384 384 44 44 25. Contingent liabilities and contingent assets There are no contingent liabilities or contingent assets that require disclosure in the financial report. 26. Parent Entity Disclosures As at and throughout the financial year ending 30 June 2015 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 Share-based Payments Reserve Revaluation Surplus Reserve Reserve Arising From an Equity Transaction Retained profits Total equity Contingent liabilities Contractual commitments for the acquisition or property, plant or equipment (6,766) - (6,766) 31,783 70,923 13,362 15,074 69,894 1,125 18 (600) (14,588) 55,849 - - (7,553) - (7,553) 12,392 55,818 10,095 14,802 48,678 741 18 (600) (7,821) 41,016 - - 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 (2014: $98,000). The periods covered by the guarantees range from two to three years. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |61 For personal use only NOTES ON THE FINANCIAL STATEMENTS 26. Parent Entity Disclosures (Continued) No deficiency of net assets existed in the controlled entities covered by guarantees at 30 June 2015 or 30 June 2014. No liability was recognised by the parent entity in relation to these guarantees, as the fair value of the guarantee is immaterial. 27. Interests in other entities (a) Material subsidiaries The Group’s principal subsidiaries at 30 June 2015 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 $3,644,000 (2014: $3,091,000). RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |62 For personal use only NOTES ON THE FINANCIAL STATEMENTS 27. Interest in other entities (Continued) (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 28. Key Management Personnel Disclosures (a) Compensation Short term employee benefits Post-employment benefits Termination benefits Share-based payments 2015 $'000 2014 $'000 26 - - - 26 - - - 2015 $ 3,384,757 131,248 237,790 89,753 3,843,548 2014 $ 2,211,530 119,189 - 32,859 2,363,578 (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 $3,400 (2014: $9,100) for taxation and advisory services. Amount payable at year end is nil (2014: $3,740). During the year the Group employed services of Dr Ian Runge to present a training course to a client. The Group paid $5,000 for the services rendered to Runge International Pty Ltd, an entity associated with Dr Ian Runge. Aggregate amounts of each of the above types of other transactions with key management personnel of RungePincockMinarco Limited: Amounts recognised as direct cost Rechargeable expenses Amounts recognised as expense Professional fees 5,000 5,000 3,400 3,400 - - 9,100 9,100 29. Events occurring after the reporting period No matter or circumstance has arisen since 30 June 2015 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 2015 |63 For personal use only 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 2015 and of its performance for the financial year ended on that date; the remuneration disclosures included in pages 13 to 22 of the directors’ report (as part of audited Remuneration Report), for the year ended 30 June 2015, 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 12th day of August 2015 RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |64 For personal use only 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 2015, the consolidated statement 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. For personal use only 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 2015 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 13 to 22 of the directors’ report for the year ended 30 June 2015. 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 2015 complies with section 300A of the Corporations Act 2001. BDO Audit Pty Ltd P A Gallagher Director Brisbane, 12 August 2015 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. For personal use only CORPORATE GOVERNANCE STATEMENT Corporate Governance Statement – Year Ended 30 June 2015 The Board and Management consider that it is crucial to the Group’s long term performance and sustainability and to protect and enhance the interests of the Company’s shareholders and other stakeholders, that it adopts an appropriate corporate governance framework pursuant to which the Company and its related companies globally will conduct its operations in Australia and internationally with integrity, accountability and in a transparent and open manner. The Company regularly reviews its governance arrangements as well as developments in market practice, expectations and regulation. The Company’s Corporate Governance Statement has been approved by the Board of RungePincockMinarco Limited and explains how the Group addresses the requirements of the Corporations Act 2001, the ASX Listing ‘Corporate Governance Principles and Rules 2001 and the ASX Corporate Governance Council’s Recommendations - 3rd Edition’ (the ‘ASX Principles and Recommendations’) and is current as at 30 June 2015. The Company’s ASX Appendix 4G, which is a checklist cross-referencing the ASX Principles and Recommendations to the relevant disclosures in the statement Corporate Governance Statement, the Company’s 2015 Annual Report and other relevance governance documents and materials on the Company’s website, are provided the Company’s website at http://www.rpmglobal.com/about-us/investor-centre/corporate-governance/. The Company’s Corporate Governance Statement together with the ASX Appendix 4G and this Annual Report, were also lodged with the ASX on 13 August 2015. the corporate governance section of in The Board of the Company strives to meet the highest standards of Corporate Governance, but recognises that it is also crucial that the Company’s governance framework reflects the current size, operations and industry in which the Company operates. The Company has complied with the majority of recommendations of the ASX Principles and Recommendations with the exception of a few. The Board believes the areas of non-conformance, which are explained in the Corporate Governance Statement and the ASX Appendix 4G do not materially impact on the Company’s ability to achieve the highest standards of Corporate Governance, whilst at the same time ensuring the Company is able to achieve the expectations of its shareholders and other stakeholders. RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |67 For personal use only SHAREHOLDER INFORMATION The shareholder information set out below was applicable as at 31 July 2015. 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 100 217 118 221 101 757 - 2 4 47 17 70 The number of shareholdings held in less than marketable parcels of 925 shares is 82. B. Equity Security Holders The names of the twenty largest holders of quoted equity securities are listed below: Name NATIONAL NOMINEES LIMITED J P MORGAN NOMINEES AUSTRALIA LIMITED RUNGE INTERNATIONAL PTY LTD CITICORP NOMINEES PTY LIMITED PAUA PTY LTD BNP PARIBAS NOMS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD MR STEPHEN JOHN BALDWIN + MRS ANDREA MAREE BALDWIN MR DAVID BRIAN MELDRUM THE RIDGE NZ PTY LTD MS TRACY ROWLANDS MRS ANDRE JOAN PHILLIPS HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED BOND STREET CUSTODIANS LIMITED MRS DONNA MARGARET LUXTON MR OLAF WYBERNEIT MR IAN JAMES LUXTON Unquoted equity securities 7,665,000 options over unissued shares: for further details see note 24. Number held 54,487,794 18,751,310 15,810,389 11,257,487 6,552,003 5,457,844 5,042,305 4,101,311 3,757,889 2,778,421 2,642,511 1,900,211 1,295,000 1,245,889 1,173,508 1,146,452 1,128,471 1,123,001 1,009,243 982,934 Percentage of issued shares 30.67 10.56 8.90 6.34 3.69 3.07 2.84 2.31 2.12 1.56 1.49 1.07 0.73 0.70 0.66 0.65 0.64 0.63 0.57 0.55 141,643,973 79.75 RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |68 For personal use only SHAREHOLDER INFORMATION C. Substantial Holders The names of the substantial shareholders listed in the holding register are: Estimated beneficial holdings as at 31 July 2015 IOOF Holdings Limited (Perennial Value) Ruffer LLP Runge International Pty Ltd Accorn Capital Limited Commonwealth Bank of Australia (Colonial) Discovery Asset Management Pty Ltd Northcape Capital Pty Ltd D. Voting Rights Refer to note 16 for voting rights attached to ordinary shares. Number held Percentage 22,188,649 20,336,726 16,310,484 11,166,470 11,115,818 11,015,595 8,945,050 12.49 11.45 9.20 6.29 6.26 6.20 5.03 RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |69 For personal use only CORPORATE DIRECTORY Directors Allan Brackin Chairman Richard Mathews Managing Director Dr Ian Runge Non-executive Director Ross Walker Non-executive Director Company Secretary Registered Office Level 2, 295 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 James O’Neill Group General Counsel and Company Secretary Stock Exchange Listing The Company is listed on the Australian Securities Exchange Limited (ASX: RUL) ABN 17 010 672 321 RUNGEPINCOCKMINARCO LIMITED // ANNUAL REPORT 2015 |70 For personal use only This page intentionally left blank. This page intentionally left blank. For personal use only Level 2, 295 Ann St, Brisbane QLD 4000 P: +61 7 3100 7200 F: +61 7 3100 7297 www.rpmglobal.com For personal use only 

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