VDM GROUP LIMITED
and its Controlled Entities
ABN 95 109 829 334
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2013
1
VDM GROUP LIMITED
CORPORATE INFORMATION
Directors
Mr M Perrott AM
Dr D Hua
Mr X Ru
Mr B Nazer
Mr M Fry
Mr R Mickle
Non-Executive Chairperson
Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Company Secretary
Mrs S Drury
Registered and
Principal Office
Postal Address
Auditors
Share Register
Level 2
27-31 Troode Street
West Perth WA 6005
Telephone (08) 9265 1100
Facsimile (08) 9265 1399
Website www.vdmgroup.com.au
Locked Bag 109
West Perth WA 6872
Ernst & Young
11 Mounts Bay Road
Perth WA 6000
Computershare Investor Services Pty Limited
Level 2
45 St George’s Terrace
Perth WA 6000
Telephone 1300 557 010
(outside Australia) +61 3 9323 2000
Facsimile +61 8 9323 2033
VDM Group Limited shares are listed on the Australian Securities Exchange (ASX)
ASX Code
VMG
ACN
ABN
109 829 334
95 109 829 334
In this report, the following definitions apply:
“Board” means the Board of Directors of VDM Group Limited
“Company” or” VDM” means VDM Group Limited ABN 95 109 829 334
“VDM Group” or “Group” means VDM Group Limited and its controlled entities
2
VDM GROUP LIMITED
CONTENTS
CHAIRMAN'S REPORT
MANAGING DIRECTOR’S REPORT
DIRECTORS' REPORT
AUDITOR’S INDEPENDENCE DECLARATION
CORPORATE GOVERNANCE STATEMENT
STATEMENT OF COMPREHENSIVE INCOME
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CASH FLOWS
STATEMENT OF CHANGES IN EQUITY
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT
ASX ADDITIONAL INFORMATION
4
5
6 - 25
26
27 - 34
35
36
37
38
39 - 88
89
90
92 - 93
3
VDM GROUP LIMITED
CHAIRMAN’S REPORT
Dear Shareholders,
It has been another disappointing year for the company and with poor trading continuing.
As a director, chairman and shareholder I am particularly disappointed with the result.
The construction industry generally has become more competitive and difficult to work within. This is no excuse for the
poor result achieved. We have made necessary changes to senior management but much damage to the company
had already occurred.
We believe it fortuitous that H&H Holdings Australia Pty Ltd (H&H) decided to invest in the company. Although their
initial proposal, which was approved by shareholders and was at a higher price per share than the ultimate resolution,
circumstances within the company changed at a particularly pertinent time. It meant H&H became a major
shareholder of the company at a lesser price than had previously been anticipated. Nevertheless they are the major
shareholder and, as Chairman, I’m delighted to have them on the register and I’m particularly pleased that Dr Dongyi
Hua is our Managing Director. Mr Ru has also joined as a Director and I am grateful for his input to date.
With the introduction of H&H and the appointment of Dr Hua, the focus of the company has changed such that we’ve
been able to remove a number of our loss making businesses and focus on those where we may have a point of
difference and can provide a better service at improved margins. At the same time there will be a number of activities
where our trading position between Australia and China can be used profitably.
The contacts and relationships which Dr Hua has brought to the company are quite extensive and although it is at an
early stage, we’re encouraged by the new opportunities which are being presented to the company.
I would especially like to thank my fellow Directors for the time and effort made for our company which has been done
in a difficult external and internal environment.
I look forward to welcoming you to our shareholders’ meeting.
Regards
MICHAEL D PERROTT AM
Chairman
4
VDM GROUP LIMITED
MANAGING DIRECTOR’S REPORT
INTRODUCTION
The 2012/13 financial year was completed without my involvement with the company.
My duties commenced on the 9th September and my report is prepared accordingly.
OVERVIEW
The financial results of the company for the past financial year have been poor. Recent ASX announcements and
press reports have outlined the number of projects which were carried out by the company where costs exceeded
revenue. Although this occurred mainly in Western Australia, there were some projects reporting less than the
required margin in Queensland. The various consulting businesses have operated with mixed results. Some continue
to be successful financially and others not. This is the reason why these activities are being divested by way of
Management Buy-Outs or being closed down. VDM Group announced on 20 September 2013 that it had entered into
a non-binding sale agreement to sell all the issued share capital of VDM Construction (Eastern Operations (Pty) Ltd.
The transaction was completed on 7 October 2013. This will devolve the company’s activities in Queensland.
The poor financial results required a significant change to the company with the addition of further funds. As a result,
VDM entered into a transaction with H&H whereby H&H agreed to lend $5,000,000to VDM Group and, subject to
shareholder approval at the forthcoming AGM, the loan will automatically convert into 500,000,000shares at a price of
$0.01 per share.
Following the issue of the conversion shares to H&H, H&H will have the right to appoint a further nominee Director, to
the Board, which the Company understands will be Mr Ming Guo. Also, Barry Nazer and Richard Mickle will resign as
directors of the Board at the conclusion of the AGM. In addition, it is intended that I will become Executive Chairman,
and Michael Perrott will become Deputy Non-executive Chairman at the conclusion of the AGM.
VDM Group has also entered into an unsecured loan facility of up to $4,000,000to be provided by H&H to VDM Group
(New Facility). Subject to shareholder approval at the forthcoming AGM, VDM Group will grant a general security to
H&H in respect of the New Facility.
In addition, VDM Group announced on 29 October 2013 that it proposes to make a pro-rata entitlement offer to its
Shareholders to subscribe for Shares at a price of $0.01 per Share seeking to raise at least $9,250,000 (Rights
Issue). Pursuant to the Rights Issue, H&H has agreed to apply for $4,000,000 of shares through subscribing for some
or all of its entitlement and, if required, by underwriting the Rights Issue, conditional upon Hunter Hall Investment
Management Limited contributing an aggregate of $1,000,000 under the Rights Issue. The Rights Issue will have a
minimum subscription of $5,000,000. To the extent that H&H is required to contribute pursuant to its pro-rata
entitlement and underwriting obligations under the Rights Issue, any funds that VDM has drawn down pursuant to the
New Facility will be set off against H&H's subscription and underwriting commitments pursuant to the Rights Issue in
repayment of that part of the New Facility.
Further details of the transactions have been forwarded to shareholders with an explanatory memorandum including
an independent expert’s report.
I’m pleased to know the company operated safely during last year with an improvement in all safety measures. It will
be a continuing fundamental plank of the business that VDM Group will ensure safety is a top priority.
FUTURE
It is my intention to develop the company, ensuring we return to profitability. This means we will need to look at
projects where there is satisfactory margin and where, with our restructure involving the introduction of new people
and new business methods, we can establish a point of difference to our competitors and provide our customers with
improved service at a satisfactory price.
I hope to bring my recent experience in Western Australia and other parts of the world to the fore to affect the changes
needed and ensure the company operates profitably. The Board will be of assistance to me as it comprises people
with experience in both operations in Australia, China and elsewhere.
As I seek new opportunities, the Board will be closely involved in the decisions I make.
I look forward to meeting you at our Annual General Meeting.
Dr HUA
Managing Director
5
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
Your directors submit their report for the year ended 30 June 2013.
DIRECTORS
The names and details of the directors of VDM Group Limited (“VDM Group” or “the Company”) in office during the
year and until the date of this report are as follows. Directors were in office for the entire period unless otherwise
stated.
Current directors
Michael Perrott AM
Non-Executive Chairperson
Appointed 2 July 2009 and appointed Non-Executive Chairperson on 26 November 2010
B.Com, FAIM, FAICD
Mr Perrott has been involved in industries associated with construction, contracting, mining and land development
since 1969. He is currently the Chairperson of GME Resources Limited and a Non-Executive Director of Schaffer
Corporation Limited. He has previously held the role of Managing Director of Gardner Perrott Group Limited,
Chairperson of Port Bouvard Limited and was a Non-Executive Director of Portman Limited. He is also a member of
the Board of Notre Dame University and SANE Australia. Mr Perrott holds a Bachelor of Commerce from the
University of Western Australia and is a Fellow of the Australian Institute of Management and the Australian Institute
of Company Directors.
Current directorships of ASX listed companies:
GME Resources Limited – Non-Executive Director and Chairperson since November 1996
Schaffer Corporation Limited – Non-Executive Director since February 2005
Dongyi Hua Dr
Managing Director
Appointed Director on 28 August 2013 and appointed Managing Director on 9 September 2013
Member of the Nominations & Remuneration Committee
Member of the Audit & Risk Committee
Dr Hua is the former Vice President, Executive Chairman and CEO of CITIC Pacific Mining, a position he held from
October 2009 until April 2013. He was previously with Beijing-based CITIC Group, which he joined in 2002. Dr Hua
has held executive management positions during the past 15 years for construction and resource development
projects across Asia, Africa and Latin America in countries such as China, Angola, the Philippines, Pakistan, Brazil
and Algeria. He has extensive experience in project, contractor, cost and risk management. Dr Hua holds a
Doctorate of Engineering from the China University of Geosciences. Dr Hua is also the Vice President of the
Australian China Business Council Western Australia. Dr Hua is the ultimate legal and beneficial owner of H&H.
Xiangyang Ru
Non-Executive Director
Appointed 28 August 2013
Member of the Nominations & Remuneration Committee
Mr Ru has 15 years’ experience in senior management roles across multiple diversified businesses. Mr Ru has held
positions as General Manager of Shanghai Jiacai Printing Co, Chairman of Henan Xuchuangli Science Development
Co and Chairman of Beijing Hengdejunyi Investment Advisory Co. He has extensive experience in business
consulting, machinery equipment and financial leasing as well as significant experience in investment management.
Barry Nazer
Non-Executive Director
Appointed 1 October 2008
Chairperson of the Audit & Risk Committee
Member of the Nominations & Remuneration Committee
BBus, FCPA, FFin, ANZIIF (Fellow), FAICD
Mr Nazer is a non-executive director of Coventry Group Limited and the MG Kailis Group. He has previously held the
positions of Chief Financial Officer (CFO) of Bank of Western Australian Limited (BankWest), CFO of WESFI Limited
and CFO of Wesbeam Holdings Limited.
Mr Nazer is a Fellow of the Australian Institute of Company Directors.
Current directorships of ASX listed companies:
Coventry Group Limited – Non-Executive Director since September 2003
6
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
Michael Fry
Non-Executive Director
Appointed 3 June 2011
Member of the Audit & Risk Committee
Member of the Nominations & Remuneration Committee
BCom
Mr Fry is an experienced company manager across a broad range of industry sectors. Mr Fry has a strong
background in accounting and corporate advice having worked with KPMG (Perth), Deloitte Touche Tohmatsu
(Melbourne) and boutique corporate advisory practice Troika Securities Ltd (Perth). For much of the past decade, Mr
Fry was the Chief Financial Officer and Finance Director at Swick Mining Services Limited, a publicly listed drilling
services provider contracting to the mining industry in Australia and North America.
Currently Mr Fry is Chief Financial Officer and Company Secretary of Cougar Metals NL, a publicly listed gold
exploration and drilling services company operating in Brazil.
Former directorships of ASX listed companies held in the past three years:
Swick Mining Services Limited - Executive Director October 2006 to July 2010
Richard Mickle
Non-Executive Director
Appointed 3 June 2011
Chairperson of the Nominations & Remuneration Committee
B.Eng, FIEAust, FAICD
Mr Mickle has more than 30 years’ experience in the construction and engineering sector, including 24 years at John
Holland Group Proprietary Limited, now part of Leighton Holdings Limited. During his time at John Holland Proprietary
Limited, Mr Mickle held a number of senior management positions including General Manager of the Western Region.
He has experience in a wide range of major developments including transport, resources, industrial and built
infrastructure projects. Mr Mickle has been the Managing Director of Appian Group Limited since 2005, a project
management group based in Western Australia delivering large scale complex built infrastructure and redevelopment.
Past directors that resigned during the year and until the date of this report
Andrew Broad
Managing Director
Appointed 16 January 2012
Mr Broad was terminated as Managing Director and Chief Executive Officer on 23 August 2013.
Tim Crossley
Non-Executive Director
Appointed 15 November 2010
BApplSc (Hons), MAICD
Mr Crossley resigned as a Non-Executive Director of VDM Group on 24 October 2012.
7
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
COMPANY SECRETARY
Samantha Drury
Appointed 23 August 2013
Mrs Drury is the Chief Financial Officer of the Group and is an experienced financial and business manager across a
broad range of industry sectors. Mrs Drury has recently returned from the UK where she has worked with London
Underground Ltd since 2005, most recently holding the role of Head of Finance Operations & Support. An Australian
CPA, Mrs Drury has previously worked with Coopers & Lybrand, Jones Lang LaSalle, and the Worley ABB Joint
Venture.
Mrs Drury has gained international expertise having been involved in businesses around Australia and the United
Kingdom and brings to VDM a diverse and valuable range of skills, especially in dealing with complex contracts and
the integration of companies.
Past company secretaries that resigned during the year and until the date of this report
Michael Fry
Appointed 12 June 2013
Mr Fry was appointed company secretary as an interim measure until Mrs Drury’s appointment on 23 August 2013. Mr
Fry maintains his role as Non-Executive director.
David Coyne
Appointed 7 May 2012
Mr Coyne resigned as company secretary of VDM Group effective 12 June 2013.
INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY AND RELATED BODIES CORPORATE
As at the date of this report, the interests of the directors in the shares of the Company were:
Directors
M Perrott
D Hua
X Ru
B Nazer
M Fry
R Mickle
DIVIDENDS
Number of
Ordinary Shares
6,200,000
185,110,976
-
1,228,568
500,000
-
Number of
Options
3,100,000
-
-
614,284
250,000
-
There were no dividends declared and paid during the year ended 30 June 2013.
8
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
NATURE AND PRINCIPAL ACTIVITIES
The principal activities during the year within the consolidated entity were:
Eastern and Western construction services
Building
Remote area camp and village accommodation
Non process infrastructure including workshops, airports, control buildings, warehouses and ammonium
nitrate stores
Civil
Bulk earthworks
Land development
Marine and port infrastructure
Roads and bridges
Water and wastewater
Concrete structures
Eastern and Western consulting services
Building services consulting
Civil engineering
Environmental consulting
Marine engineering
Structural engineering
Traffic engineering
Infrastructure
Industrial
Transport
Water
Master planning
Town planning
Building design
Project management
General
VDM Group employs approximately 350 people (2012: 700) across Western Australia and Queensland.
The principal activities changed during the year with the sale of Como Engineers Pty Ltd, which was previously
reported in the mechanical and mineral process engineering segment.
9
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
OPERATING AND FINANCIAL REVIEW
VDM Group continues to be impacted by the downturn in the resources sector, which has in turn applied pressure on
the Company’s ability to return to profit.
As a result of the continuing weak market conditions and issues associated with the Customer Notice, previously
announced to the market, the Company has commenced an extensive review of its existing contracts and business
units. In light of this review, there is likely to be some restructuring of existing operations. Despite this restructure the
Company remains committed to the retention of key people and skills with expertise in the design and construction
industries.
Rationale for the transaction
The previous share subscription agreement put to Shareholders on 16 August 2013 contemplated a $15,000,000
capital raising, which would have resulted in a number of significant benefits for VDM and Shareholders. As a result of
the new arrangement entered into with H&H, some of these benefits, including the plans for the business to bid for a
greater range of projects have been curtailed.
The Board and executive management supported and enabled the completion of the share subscription to H&H for
140,080,961 shares at a price of $0.01 per share and the loan of $5,000,000 from H&H to VDM which, subject to
shareholder approval at forthcoming AGM, will automatically convert into 500,000,000 shares at a price of $0.01 per
share (Convertible Loan).
In addition, VDM Group has entered into an additional loan facility of up to $4,000,000 to be provided by H&H to VDM
Group (New Facility). Subject to shareholder approval at the forthcoming AGM, VDM Group will grant a general
security to H&H in respect of the New Facility.
The Board believes that in the near term the Convertible Loan and New Facility will still deliver a number of significant
benefits to VDM and Shareholders including:
Strengthen the balance sheet and provide working capital to assist with the restructure of the Company, to deal
with issues associated the Customer Notice and weak market conditions;
Improve market confidence in VDM which will have flow on benefits to clients, Shareholders, employees, and
suppliers;
Improve the ability of the Company to renegotiate banking and security facilities; and
The presence of H&H allows the Company to pursue new opportunities, leveraging off the global experience of
H&H in the mining and construction sectors.
In conjunction with the placement, Dr Hua, the owner of H&H, and Mr Ru have been appointed Directors of VDM
Group effective 28 August 2013. Dr Hua was also appointed Managing Director of VDM Group on 9 September 2013.
For the year ended 30 June 2013, the loss after tax attributable to the owners of VDM Group was $84,408,000 (2012:
$54,812,000 loss). The loss included impairment charges for goodwill recognised on re-measurement as at
December 2012 of $19,486,000 (2012: $3,161,000); The loss from discontinued operations of $2,749,000 (2012:
$27,792,000); included a write down of asset values to fair value less costs to sell, of $4,004,000 (2012: $32,284,000)
and included $14,685,000 de-recognition of deferred tax asset carrying values following an assessment of tax losses
that are probable of being utilised over the next 5 years (2012: $7,548,000 benefit).
Revenue from continuing operations was $205,206,000, a decrease of 11.1% on revenue recorded in 2012 for the
same period.
On a divisional basis, Western Construction recorded revenue of $127,319,000, 15.9% lower than the $151,426,000
recorded in the previous year. This has been driven by the downturn in the resources market which continues to
impact our ability to generate work. Excluded from revenue during the period is any revenue from claims and
variations that is subject to ongoing negotiations with clients, and such negotiations are not yet sufficiently progressed
so as to meet the revenue recognition criteria in Australian Accounting Standard AASB 111 Construction Contracts.
Whilst negotiations with clients regarding the outstanding claims and variations remain in progress, the Directors have
not recognised this revenue pending completion of client negotiations. The value of contingent revenue exceeds
$12,000,000. All costs associated with the contingent revenue have been fully expensed during the period.
EBIT for Western Operations was a loss of $46,782,000 (2012: $9,124,000 loss) including impairment charges of
$17,088,000 (2012: $311,000) and the exclusion of contingent revenue mentioned above. Included in the period is a
provision made against amounts owing on a construction contract where the client has gone into administration. Also
included are provisions made against the recoverability of amounts owing from joint venture partners for amounts
funded by VDM in prior years on land developments that are unlikely to be repaid in full by the joint venture partners.
10
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
Eastern Construction recorded revenue of $59,718,000, 4.0% higher than the $57,438,000 recorded in the previous
year driven by government infrastructure work. EBIT for this Division was a loss of $4,313,000 (2012: $1,934,000
loss), which included a goodwill impairment charge of $1,905,000 (2012: nil). The results of this Division were
impacted a reduced volume of work for the level of overhead and changes in delivery on key projects that have
resulted in losses on the projects being recognised.
Consulting recorded revenue of $19,022,000, 30.0% lower than the $27,142,000 recorded in the previous year. The
reduction in revenue is due to the sale of the consulting businesses in New South Wales, Victoria and the Northern
Territory in the second half of financial year 2012, coupled with reducing volumes of work, linked to the slowdown of
the economy. EBIT for this Division was a loss of $2,586,000 (2012: $345,000 loss), driven by an increase in our bad
debt provision. VDM Group is actively pursuing options to divest parts of the consulting business through various
strategies including management buy-outs. As at signing of the accounts, no agreement had been signed.
VDM Group’s net assets decreased by 97.3% compared to the previous year, which is consistent with the current
year’s loss after tax. During the year, VDM Group disposed of property, plant and equipment valued at $6,271,000.
The net assets attributable to discontinued operations was $4,999,000.
Business strategy
Following the share placement and the conversion of the convertible loan (which is subject to shareholder approval),
H&H would hold 685,110,976 shares in VDM Group, representing 43.5% of all shares on issue at that time. At that
time H&H is entitled to appoint a further nominee Director, which the Company understands will be Mr Ming Guo.
H&H’s goal is to build Shareholder wealth by accelerating VDM Group’s current strategy and expanding VDM Group’s
capabilities in order to capture a larger portion of the resource value chain. It should be noted that the proposed
changes to the strategy recommended by H&H will be subject to comprehensive review and endorsement by the
Board of VDM Group prior to the changes in strategy being adopted by VDM Group.
Restructuring of the business is likely to take 3-6 months, with growth opportunities only to be targeted when this is
complete. The timing for requirement of any further capital will be assessed on an ongoing basis, however, the
Company is confident that a restructure can be successfully executed and that new opportunities should be pursued
shortly thereafter.
As a result, the Company has entered into an additional loan facility of up to $4,000,000to be provided by H&H to
VDM Group.
In addition, VDM Group announced on 29 October 2013 that it proposes to make a pro-rata entitlement offer to its
Shareholders to subscribe for Shares at a price of $0.01 per Share seeking to raise at least $9,250,000 (Rights
Issue). Pursuant to the Rights Issue, H&H has agreed to apply for $4,000,000 of shares through subscribing for some
or all of its entitlement and, if required, by underwriting the Rights Issue, conditional upon Hunter Hall Investment
Management Limited contributing an aggregate of $1,000,000 under the Rights Issue. The Rights Issue will have a
minimum subscription of $5,000,000. To the extent that H&H is required to contribute pursuant to its pro-rata
entitlement and underwriting obligations under the Rights Issue, any funds that VDM has drawn down pursuant to the
New Facility will be set off against H&H's subscription and underwriting commitments pursuant to the Rights Issue in
repayment of that part of the New Facility.
Additional capital will strengthen VDM Group’s initiatives to attract new contracts and support these contracts. H&H
believes that with some additional capital and H&H’s strong relationships in engineering and construction, in particular
those that are Chinese related, they can accelerate the growth and sustainability of its project pipeline in engineering
and construction. In particular, H&H sees the opportunity to leverage VDM Group’s magnetite experience and track
record to win new work from Chinese magnetite developers in the future.
In addition to enhancing VDM Group’s current operations, H&H is proposing that in time VDM Group consider
expanding its exposure to the resources value chain through the establishment of 2 new divisions: Procurement
Services and Mining.
Procurement Services
H&H plans to establish VDM Group’s Procurement Services capability (e.g. equipment, materials, electrical systems,
etc.) through an International Procurement Centre in Shanghai, thereby extending VDM Group’s capabilities and
service offering to existing and new customers. This is expected to be achieved through access to capable and cost
competitive goods and services in China.
Mining
H&H proposes to leverage VDM Group’s current engineering, and construction capabilities to expand into mining.
Under H&H’s strategy changes, H&H proposes that VDM Group will look for opportunities to apply for mining rights or
invest directly into mining projects with intentions to take the project through to production or exit at an optimal return
for Shareholders.
11
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
H&H proposes that VDM Group will seek to utilise its in-house skills of engineering and construction to enhance value,
and over time introduce funding partners.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
On 28 February 2013, VDM Group announced that it had entered into a non-binding sale agreement to sell one of its
wholly owned business units, Como Engineers Pty Limited (Como) by way of a buy-out by the existing Como
management team. The sale to CE Acquisitions Pty Ltd, a company related to the existing Como management team,
was completed on 10 April 2013 for a consideration of $5,450,000 (pre transaction costs). Como was previously
reported in the mechanical and mineral process engineering segment. The business has been recognised as a
discontinued operation and is no longer disclosed in the segment note.
On 17 January 2013, VDM Group accepted an offer of $3,000,000 for the sale of freehold land and buildings classified
as a non-current asset held for sale. The sale was completed on 15 March 2013.
During the year, management restructured its internal reporting and now present discrete information based on the
location and the nature of the services provided. As such, the results are reported under three divisions: eastern
construction, western construction, and consulting.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
On 29 May 2013, VDM Group announced that it had entered into a binding share subscription agreement under which
H&H agreed to subscribe for 600,000,000 new fully paid ordinary shares at 2.5 cents per share to raise $15,000,000.
On 27 August 2013, VDM Group announced that the company was in dispute with a major customer in regard to the
status of a material contract. VDM Group received a notice from the customer purporting to exercise its right to take
the whole of the remaining works under the contract out of the hands of VDM Group (Customer Notice). The effect of
this notice may materially impact the operating performance and short term future cash flows of VDM Group.
Following receipt of the Customer Notice, VDM Group was notified by H&H that it considered the matter to be a
material adverse change within the definition of the existing share subscription agreement. As a result, an alternative
capital raising was agreed with H&H on 27 August 2013 to provide capital of $6,401,000 immediately, via a Placement
of 140,080,961 shares at 1.0 cent per share to raise $1,401,000 and a Convertible Loan of $5,000,000 issued to H&H
with a conversion price of 1.0 cent per share (conversion subject to shareholder approval at the forthcoming AGM).
In conjunction with the placement, Dr Hua, the owner of H&H, and Mr Ru have been appointed Directors of VDM
Group effective 28 August 2013. Dr Hua was also appointed Managing Director of VDM Group effective from 9
September 2013.
As announced on 23 August 2013, Mr Broad was terminated as Managing Director and Chief Executive Officer.
On 9 August 2013, VDM Group received $1,350,000 to enable the discharge of its mortgage and sale of its shares in
Quartz South Hedland Pty Ltd.
VDM Group announced on 20 September 2013 that it had entered into a non-binding sale agreement with an outside
party to sell all the issued share capital of VDM Construction (Eastern Operations) Pty Ltd for $2,750,000. A binding
share sale agreement was executed on 7 October 2013.
VDM Group is actively pursuing options to divest parts of the consulting business via management buy-outs. As at
signing of the accounts, no agreement had been signed.
VDM Group also entered into an unsecured loan facility of up to $4,000,000 to be provided by H&H to VDM Group
(New Facility). Subject to shareholder approval at the forthcoming AGM, VDM Group will grant a general security to
H&H in respect of the New Facility.
In addition, on 29 October 2013, VDM Group announced it is proposing to make a pro-rata entitlement offer to its
Shareholders to subscribe for Shares at a price of $0.01 per Share seeking to raise at least $9,250,000 (Rights
Issue). Pursuant to the Rights Issue, H&H has agreed to apply for $4,000,000 of shares through subscribing for some
or all of its entitlement and, if required, by underwriting the Rights Issue, conditional upon Hunter Hall Investment
Management Limited contributing an aggregate of $1,000,000 under the Rights Issue. The Rights Issue will have a
minimum subscription of $5,000,000. To the extent that H&H is required to contribute pursuant to its pro-rata
entitlement and underwriting obligations under the Rights Issue, any funds that VDM has drawn down pursuant to the
New Facility will be set off against H&H's subscription and underwriting commitments pursuant to the Rights Issue in
repayment of that part of the New Facility. Further details of the Rights Issue will be provided to shareholders in due
course.
12
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
Where the Directors have omitted information due to the likelihood of unreasonable prejudice the Directors have
disclosed their evaluation for concluding as such.
ENVIRONMENTAL REGULATION AND PERFORMANCE
VDM Group's operations are subject to environmental regulations under Commonwealth and State legislation. The Board
believes that VDM Group has adequate systems in place for the management of its environmental requirements and is not
aware of any breach of those environmental requirements as they apply to VDM Group.
SHARE OPTIONS
As at the date of this report, there were 464,992,686 unissued ordinary shares under option (2012: 465,083,311). There
were no options exercised during the financial year and up to the date of this report.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
VDM Group has agreed to indemnify all the directors and executive officers for any costs or expenses that may be
incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers
of entities of the consolidated entity for which they may be held personally liable.
The Company has paid a premium to insure the directors and officers of the Company and its controlled entities.
Details of the premium are subject to a confidentiality clause under the contract of insurance.
DIRECTORS’ MEETINGS
The number of meetings of directors (including meetings of committees of directors) held during the year, and the
number of meetings attended by each director, were as follows:
Board of Directors
Current directors
M Perrott (Chairperson)
B Nazer
M Fry
R Mickle
Past directors
A Broad
T Crossley 3
Nominations and Remuneration Committee
Current directors
R Mickle (Chairperson)1
B Nazer
M Fry 2
Past directors
A Broad
T Crossley 3
Audit and Risk Committee
Current directors
B Nazer (Chairperson)
M Fry
Meetings
Attended
Maximum
Possible
17
16
17
16
17
2
17
17
17
17
17
3
Meetings
Attended
Maximum
Possible
2
1
1
1
1
2
2
1
2
2
Meetings
Attended
Maximum
Possible
5
5
5
5
Notes:
1.
2
3.
Appointed Chairperson of the Nominations and Remuneration Committee on 24 October 2012.
Appointed to the committee on 1 January 2013.
Resigned as a Non-Executive Director 24 October 2012.
13
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
The directors received an Independence Declaration from the auditor of VDM Group Limited, attached on page 26.
The directors are satisfied that the provision of non-audit services is compatible with the general standard of
independence for auditors imposed by the Corporations Act.
Refer to Note 36 for disclosure relating to the cost of non-audit services conducted during the year.
Rounding
The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where
rounding is applicable) under the option available to the Company under ASIC Class Order 98/0100. The Company is
an entity to which the Class Order applies.
14
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
REMUNERATION REPORT (AUDITED)
This remuneration report outlines director and executive remuneration arrangements of the Company and VDM Group
in accordance with the requirements of the Corporations Act 2001 (the Act) and its regulations. This information has
been audited as required by section 308(3C) of the Act.
For the purposes of this report, key management personnel (KMP) of VDM Group are defined as those persons
having authority and responsibility for planning, directing and controlling the major activities of the Company and VDM
Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company.
For the purposes of this report, the term 'executive' encompasses the executive director and senior executives of the
Parent and of VDM Group companies.
1.
Individual KMP disclosures
Details of KMP including the executives of the Company and VDM Group are set out below.
Current directors
M Perrott
D Hua
X Ru
B Nazer
M Fry
R Mickle
Past directors
A Broad
T Crossley
Current executives
R Gregg
S Drury
Past executives
J Kemp
R Gonzales
T Fallon
D Coyne
Non – Executive Chairperson
Managing Director -– appointed director on 28 August 2013 and Managing
Director on 9 September 2013
Non – Executive Director -– appointed 28 August 2013
Non – Executive Director
Non – Executive Director
Non – Executive Director
Managing Director -– terminated 23 August 2013
Non – Executive Director – resigned 24 October 2012
Executive General Manager – Eastern Construction and Consulting
Chief Financial Officer and Company Secretary – appointed 24 June 2013
General Manager – Western Construction – appointed 7 November 2012
and resigned on 6 September 2013
Executive General Manager – Development – terminated 25 January 2013
Executive General Manager – Western Operations – resigned 27 November
2012
Chief Financial Officer – resigned 12 June 2013
2.
No vote on remuneration report at the 2012 Annual General Meeting
At the 2012 Annual General meeting (AGM) VDM Group received 27.5% of votes cast against the 2012 remuneration
report. In response to the no vote, the Non-Executive Directors (NEDs) agreed to reduce their fees by 10% during the
period November 2012 to 30 June 2013.
In light of company performance, the former Managing Director (Mr Broad) offered to reduce his salary by 12% during
the period November 2012 to 30 June 2013, which was accepted by the Nominations and Remuneration Committee.
3.
Board oversight of remuneration
Nominations and Remuneration Committee
The Nominations and Remuneration Committee is responsible for making recommendations to the Board on the
remuneration arrangements for directors and executives.
The Nominations and Remuneration Committee assesses the appropriateness of the nature and amount of
remuneration of executives on a periodic basis by reference to relevant employment market conditions with the overall
objective of ensuring maximum stakeholder benefit from the retention of a high performing director and executive
team.
The Nominations and Remuneration Committee comprises four non-executive directors and one executive director.
15
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
Remuneration approval process
The Board approves the remuneration arrangements of the Managing Director and executives and all awards made
under the long-term incentive (LTI) plan, following recommendations from the Nominations and Remuneration
Committee. The Board also sets the aggregate remuneration of NEDs which is then subject to shareholder approval.
The Nominations and Remuneration Committee approves, having regard to the recommendations made by the
Managing Director, the level of the VDM Group short-term incentive (STI) pool.
Remuneration strategy
VDM Group’s remuneration strategy is designed to attract, motivate and retain employees and NEDs by identifying
and rewarding high performers and recognising the contribution of each employee to the continued growth and
success of VDM Group.
To this end, key objectives of the Company’s reward framework are to ensure that remuneration practices:
Are aligned to the VDM Group’s business strategy;
Offer competitive remuneration benchmarked against the external market;
Provide strong linkage between individual and group performance and rewards; and
Align the interests of executives with shareholders through measuring total shareholder return (TSR).
Remuneration structure
In accordance with good corporate governance practice, the structure of NED and executive remuneration is separate
and distinct.
4.
Non-Executive Director remuneration arrangements
Remuneration policy
The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and
retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.
The amount of aggregate remuneration sought to be approved by shareholders and the fee structure is reviewed
annually against fees paid to NEDs of comparable companies. The Board considers advice from external consultants
when undertaking the annual review process.
The constitution and the ASX listing rules specify that the NED fee pool shall be determined from time to time by a
general meeting. The latest determination was at the 2010 AGM held on 19 November 2010 when shareholders
approved an aggregate fee pool of $600,000 per year. This amount includes superannuation and fees paid to
directors in their capacity as members of the Board and its committees.
The Board will not seek any increase for the NED fee pool at the 2013 Annual General Meeting.
Structure
The remuneration of NEDs consists of directors’ fees and committee fees. NEDs do not receive retirement benefits,
other than superannuation and they do not participate in any incentive programs.
The NED fees have not changed since Aug 2010 where it was agreed that each NED received an annual base fee of
$75,000 for being a director of VDM Group. The Chairperson of the Board received an additional $65,000. These fees
were inclusive of Board committee participation, except an uplift of $10,000 for the Chairperson of the Audit and Risk
Committee role which is considered to be substantially active. The Nominations and Remuneration Committee
recommended that additional remuneration be paid if activity on any Board Committees is substantially active.
In November 2012, the NEDs agreed to reduce their fees by 10% till 30 June 2013 in light of company performance.
The remuneration of NEDs for the year ended 30 June 2013 and 30 June 2012 is detailed in tables 1 and 2
respectively of this report.
16
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
5.
Executive remuneration arrangements
Remuneration levels and mix
VDM Group aims to reward executives with a level and mix of remuneration commensurate with their position and
responsibilities within VDM Group and aligned with market practice.
VDM Group’s policy is to position total employment cost (TEC) close to the median of its defined talent market to
ensure a competitive offering. VDM Group undertakes an annual remuneration review to determine the total
remuneration positioning against the market.
The Managing Director’s remuneration mix comprises 40% fixed remuneration as a proportion of total remuneration,
30% maximum STI and 30% maximum LTI.
Structure
The executive remuneration framework consists of the following components:
Fixed remuneration; and
Variable remuneration
The table below illustrates the structure of VDM Group’s executive remuneration arrangements:
Remuneration
component
Vehicle
Purpose
Link to performance
Fixed remuneration
Represented by
total employment
cost (TEC)
Comprises base
salary,
superannuation
contributions and
other benefits
Set with reference to role,
market and experience
Executives are given the
opportunity to receive their
fixed remuneration in a
variety of forms including
cash and fringe benefits
such as motor vehicles. It is
intended that the manner of
payment chosen will be
optimal for the recipient
without creating undue cost
for VDM Group
STI component
Paid in cash
Rewards executives for
their contribution to
achievement of VDM Group
and business unit
outcomes, as well as
individual key performance
indicators (KPIs)
No direct link to company
performance
Earnings before Interest and Tax
Linked to safety performance
improvement
Linked to other internal non-
financial measures including
project performance and business
development
LTI component
Awards are made
in the form of
performance
shares
Rewards executives for
their contribution to the
creation of shareholder
value over the longer term
Vesting of awards is dependent
on VDM Group’s TSR
performance relative to ASX 200
Industrial Index
17
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
Fixed remuneration
Executive contracts of employment do not include any guaranteed base pay increases. TEC is reviewed annually by
the Nominations and Remuneration Committee. The process consists of a review of company, business unit and
individual performance, relevant comparative remuneration internally and externally and, where appropriate, external
advice independent of management.
The fixed component of executives’ remuneration is detailed in the preceding table.
Variable remuneration — short term incentive (STI)
VDM Group operates an annual STI program that is available to executives and awards a cash bonus subject to the
attainment of clearly defined VDM Group, business unit and individual measures.
The total potential STI available is set at a level so as to provide sufficient incentive to executives to achieve the
operational targets and such that the cost to VDM Group is reasonable in the circumstances.
Actual STI payments awarded to each executive depend on the extent to which specific targets set at the beginning of
the financial year are met. The targets consist of a number of key performance indicators (KPIs) covering both
financial and non-financial, corporate and individual measures of performance.
Performance measures
Financial measure:
VDM Group Earnings before Interest and Tax (EBIT)
Non-financial measures:
Lost Time Injury Frequency Rate (LTIFR)
Market and competitive positioning
Project performance against tender expectations
Risk management
Leadership/ team contribution
Implementation of key growth initiatives
Proportion of STI
award measure
applies to
60-80%
20-40%
These measures were chosen as they represent the key drivers for the short-term success of the business and
provide a framework for delivering long-term value.
The aggregate of annual STI payments available for executives across the VDM Group is subject to the approval of
the Nominations and Remuneration Committee. On an annual basis, after consideration of performance against KPIs,
the Nominations and Remuneration Committee, in line with their responsibilities, determine the amount, if any, of the
short-term incentive to be paid to each executive. This process usually occurs within three months after the reporting
date. Payments made are delivered as a cash bonus in the following reporting period.
For the 2012 financial year, $300,000 of the $350,000 STI bonus pool was paid to executives in November 2012. In
April 2013, a review was undertaken of Mr Broads STI which resulted in a further $70,000 being paid. In total,
bonuses of $370,000 were paid to KMP for the 2012 financial year.
The KMP did not meet the specific KPI targets set at the beginning of the year and as such there were no STI
payments approved by the Nominations & Remuneration Committee for the 2013 financial year.
Variable remuneration — long term incentive (LTI)
During the course of the 2012 financial year, the KMP of the Company were invited by the Board to participate in the
VDM Group LTI plan.
Under the LTI plan, KMP may be offered performance rights under the VDM Group Equity Incentive Plan every 12
months during their term of employment.
Each performance right entitles the KMP to acquire one fully paid ordinary share in the Company for no consideration
(subject to the predetermined performance and vesting conditions below).
18
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
Each offer will be made on the following basis:
The maximum number of performance rights available for each offer is up to 67.5% of the KMP’s annual TEC
divided by the VWAP share price for the 5 days immediately preceding the relevant offer date.
VDM’s TSR ranking will be determined by comparing VDM’s TSR over the performance period against the
average TSR for the ASX 200 Industrial group over two years, commencing on the effective offer date.
The actual number of performance rights offered will be determined in accordance with VDM’s Total
Shareholder Return (TSR) ranking as follows:
Relative TSR performance ranking
Below the 50th percentile
At the 50th percentile or above
Percentage of award that will vest
0%
100%
For the purpose of the rights issued during the 2012 financial year, the grant date was 1 December 2011.
The performance rights vest over a period of three years. 50% of the rights vest two years from the effective
offer date, and the remaining 50% vest three years from the grant date.
Vesting of the rights is subject to VDM Group being profitable during the two year period from the effective
offer date.
In the event that VDM Group is not profitable during this two year period, but the TSR 50% hurdle has been
exceeded, the Board has the discretion to allow up to 50% of the rights that would have otherwise been
available to vest to vest to an employee.
The employee is able to exercise the performance rights up to one year after vesting before the performance
rights lapse.
Where the KMP ceases employment during the term of their employment prior to the vesting of their award, the
performance rights which have not vested or been granted will automatically lapse unless the Board determines
otherwise in its absolute discretion.
Average TSR for the ASX 200 Industrial group was considered the most appropriate benchmark to rank VDM’s TSR.
This benchmark was chosen as the Directors believe it enables the best comparison of the Group’s performance
compared to the performance of similar companies in the industrial sector. TSR and profitability were chosen to link
LTI’s with shareholder wealth.
A total of 34,391,304 performance rights were offered during the 2012 financial year. During the 2013 financial year,
16,565,217 performance rights lapsed as a result of KMP resigning during the year. A further 11,956,522 performance
rights lapsed following the termination of Mr Broad on 23 August 2013 and will be reflected in the 2014 remuneration
report. The performance rights offered to Mr Broad were approved by shareholders at the Annual General Meeting of
the Company on 29 November 2012 and were revalued at $0.012 per right.
KMP did not meet the predetermined performance and vesting conditions in the 2013 financial year. As a result, no
additional performance rights were approved by the Nominations & Remuneration Committee in 2013.
19
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
Company performance and the link to remuneration
Company performance and its link to short-term incentives
The financial performance measure driving the majority of the STI payment outcomes is Earnings before Interest and
Tax (EBIT). The table below shows VDM Group Limited’s gross EBIT history for the past five years (including the
current period).
EBIT
$’000
(66,957)
(29,759)
(62,810)
25,594
(108,580)
Closing
share price
(cents per
share)
0.01
0.05
0.07
0.15
0.06
2013
2012
2011
2010
2009
As a result of the negative EBIT performance in 2013, no STI awards were made in the 2013 financial year.
Company performance and its link to long-term incentives
The performance measure which drives LTIs vesting is the Company’s TSR performance relative to the ASX-200
Industrial group. 34,391,304 performance rights were offered during the 2012 financial year. During the 2013 financial
year, 16,565,217 performance rights lapsed as a result of KMP resigning during the year.
The graph below shows VDM Group Limited’s TSR performance relative to the ASX-200 Industrial group since grant
date on 1 December 2011.
200
150
100
50
)
0
0
1
o
t
d
e
s
a
b
e
r
(
R
S
T
‐
1‐Dec‐11
1‐Mar‐12
1‐Jun‐12
1‐Sep‐12
1‐Dec‐12
1‐Mar‐13
1‐Jun‐13
VMG share price
ASX 200 Industrial Group
20
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
Executive contractual arrangements
Remuneration arrangements for KMP are formalised in employment agreements. Details of these contracts are
provided below.
Managing Director
The Managing Director is employed under a rolling contract.
With effect from 9 September 2013, the remuneration of the Managing Director is as follows:
Fixed remuneration of $625,000 per annum (representing 40% as a proportion of total maximum
remuneration);
Maximum STI opportunity is 75% of TEC (representing 30% as a proportion of total maximum remuneration);
and
Maximum LTI opportunity is 75% of TEC (representing 30% as a proportion of total maximum remuneration).
The Managing Directors termination provisions are as follows:
Notice period
Employer-initiated
termination
6 months
Payment in lieu of
notice
6 months
Termination for
serious
misconduct
Employee-initiated
termination
None
None
3 months
3 months (resignation
is effective
immediately if
shareholder approval
is not obtained in
respect of the
convertible loan
(refer to note 35)
Treatment of STI
on termination
Pro-rated for time and
performance subject to
Board discretion
Pro-rated for time and
performance subject to
Board discretion
Pro-rated for time and
performance subject to
Board discretion
Treatment of LTI on
termination
Unvested awards forfeited
subject to Board discretion
Unvested awards forfeited
Unvested awards forfeited
subject to Board discretion
Other KMP
The Company may terminate all other KMP by providing between 6 weeks to three months written notice or providing
payment in lieu of the notice period. The Company may terminate a contract at any time without notice if serious
misconduct has occurred.
Payments applicable to outgoing executives
Mr Gonzales received a termination payment of $35,649, in accordance with the conditions agreed upon at the
termination of his employment contract.
Mr Broad received an employer-initiated termination payment of 6 months payment in lieu of notice in accordance with
the terms of his employment contract, which amounted to $312,500. The termination payment will be reflected in the
2014 remuneration table.
21
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
Remuneration of directors and key management personnel
Table 1: Remuneration for the year ended 30 June 2013
SHORT TERM
POST
EMPLOYMENT
Base
Salary &
Fees
$
Current non-executive directors
M Perrott
B Nazer
R Mickle
M Fry
131,488
73,891
59,005
59,005
Past non-executive directors
T Crossley1
23,288
Cash
Bonus
$
-
-
-
-
-
Past executive directors
A Broad7
556,730
70,0009
Current key management personnel
R Gregg
S Drury3
410,620
-
Past key management personnel
J Kemp2
R Gonzales4
D Coyne5
T Fallon6
233,331
239,418
216,649
384,206
-
-
-
-
-
-
Notes:-
2,387,631
70,000
Non-
Monetary
Benefits
$
-
-
-
-
-
-
-
-
-
-
-
-
-
EQUITY
SETTLED
SHARE
BASED
PAYMENT
Value of
Performance
Rights
$
-
-
-
-
-
Super
Contributions
$
-
6,650
5,311
5,311
2,096
25,000
(20,635) 8
53,128
97,222
Termination
Benefits
Total
Performance
Related
$
$
%
131,488
80,541
64,316
64,316
25,384
-
-
-
-
-
631,095
8%
560,970
17%
-
-
-
-
-
-
-
-
-
-
-
24,392
25,000
8,235
-
-
-
233,331
(56,468)
(37,646)
(65,252)
35,649
220,222
-
-
371,560
182,401
155,123
(82,779)
35,649
2,565,624
-
-
(26%)
(10%)
(36%)
0%
J Kemp was appointed with effect from 7 November 2012 and resigned on 6 September 2013.
1. T Crossley resigned with effect from 24 October 2012.
2.
3. S Drury was appointed with effect from 24 June 2013.
4. R Gonzales was terminated with effect from 25 January 2013.
5. D Coyne resigned with effect from 12 June 2013.
6. T Fallon resigned with effect from 27 November 2012.
7. A Broad was terminated as Managing Director and Chief Executive Officer on 23 August 2013.
8. The performance rights granted to Mr Broad of 11,956,522 in 2012 were approved at the Annual General Meeting on 29
November 2012. The performance rights granted to Mr Broad were revalued at $0.012 per right based on the underlying
share price at that time.
9. The bonus paid to A Broad relates to a correction of the 2012 STI.
22
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
Table 2: Remuneration for the year ended 30 June 2012
SHORT TERM
POST
EMPLOYMENT
Base
Salary &
Fees
$
Current non-executive directors
M Perrott
B Nazer
T Crossley
M Fry
R Mickle
140,000
77,981
68,807
75,000
75,000
Cash
Bonus
$
-
-
-
-
-
Current executive directors
A Broad1
525,000
150,000
Past non-executive directors
J van der Meer3
297,400
-
Current key management personnel
R Gonzales
372,509
50,000
R Gregg
T Fallon6
D Coyne2
341,824
50,000
486,770
25,000
51,722
-
-
50,000
Past key management personnel
G Simpson4
L Troncone5
118,578
90,882
2,721,473
325,000
Notes:
Non-
Monetary
Benefits
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
EQUITY
SETTLED
SHARE
BASED
PAYMENT
Value of
Performance
Rights
$
-
-
-
-
-
Super
Contributions
$
-
7,019
6,193
6,750
6,750
25,000
115,028
52,618
-
Termination
Benefits
Total
Performance
Related
$
$
%
140,000
85,000
75,000
81,750
81,750
-
-
-
-
-
815,028
33%
350,018
-
-
-
-
-
-
-
-
-
-
-
-
23,100
47,230
16,004
3,943
11,022
30,142
56,468
56,468
65,252
37,646
502,077
495,522
593,026
93,311
-
-
82,965
184,869
175,000
373,720
235,771
330,862
257,965
3,871,071
21%
21%
15%
40%
-
13%
17%
J van der Meer resigned from the Board on 24 November 2011 and no longer meets the definition of KMP after this date.
1. A Broad was appointed Managing Director on 16 January 2012.
2. D Coyne was appointed on 7 May 2012. The value of the performance rights are calculated from 1 December 2011.
3.
4. G Simpson resigned on 31 August 2011.
5.
6. T Fallon has resigned with effect from 27 November 2012.
L Troncone resigned on 26 October 2011.
23
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
6.
Additional statutory disclosure
This section sets out the additional disclosures required under the Corporations Act 2001.
The table below discloses the performance rights granted to executives as remuneration during the year ended 30
June 2013. Performance Rights do not carry any voting or dividend rights and will automatically become vested
performance rights once the vesting conditions have been met.
Table 3: Performance rights awarded and vested during the year ended 30 June 2013
Terms and conditions for each grant during the year
Rights
awarded
during
the year
(No.)
Grant date
Fair
value
per
right at
award
date ($)
First vesting date
Second vesting
date
No.
vested
during
the year
No. lapsed
during the
year
Past executive
directors
A Broad1
Current key management
personnel
R Gregg
Past key management personnel
R Gonzales2
T Fallon3
D Coyne4
Notes:
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1 December 2011
$0.0398
1 December 2013
1 December 2014
1 December 2011
$0.0398
1 December 2013
1 December 2014
7 May 2012
$0.0398
1 December 2013
1 December 2014
-
-
-
-
-
-
-
-
5,869,565
6,782,609
3,913,043
16,565,217
1. Performance rights issued to A Broad in 2012 were approved at the 2012 Annual General Meeting.
2. R Gonzales was terminated with effect from 25 January 2013.
3. T Fallon resigned with effect from 27 November 2012.
4. D Coyne resigned with effect from 12 June 2013.
A further 11,956,522 performance rights lapsed during 2014 following the termination of A Broad on 23 August 2013.
24
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2013
Table 3: Performance rights awarded and vested during the year ended 30 June 2012
Terms and conditions for each grant during the year
Grant date
Rights
awarded
during the
year (No.)
Fair
value
per
right at
award
date ($)
First vesting date
Second vesting
date
No.
vested
during
the year
No.
lapsed
during
the year
Current executive
directors
A Broad1
11,956,522
1 December 2011
$0.0398
1 December 2013
1 December 2014
Current key management personnel
R Gonzales
R Gregg
T Fallon3
D Coyne2
Notes:
5,869,565
1 December 2011
$0.0398
1 December 2013
1 December 2014
5,869,565
1 December 2011
$0.0398
1 December 2013
1 December 2014
6,782,609
1 December 2011
$0.0398
1 December 2013
1 December 2014
3,913,043
7 May 2012
$0.0398
1 December 2013
1 December 2014
34,391,304
1. Performance rights issued to A Broad are subject to shareholder approval at the 2012 Annual General Meeting.
2. Performance rights issued to D Coyne are effective on the date employment commenced with the company.
3. T Fallon has resigned with effect from 27 November 2012 and his performance rights will lapse upon his date of
termination.
-
-
-
-
-
-
-
-
-
-
-
-
Signed in accordance with a resolution of the directors.
Dr Hua
Managing Director
Perth, Western Australia
29 October 2013
25
VDM GROUP LIMITED
AUDITOR’S INDEPENDENCE DECLARATION
For the year ended 30 June 2013
26
VDM GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
For the year ended 30 June 2013
CORPORATE GOVERNANCE STATEMENT
ASX Principles and Recommendations
The Board of Directors (“Board”) of VDM Group Limited (“VDM” or “Company”) is responsible for the corporate
governance of the Company and to ensure that VDM and its controlled entities (“VDM Group”) are properly managed
and controlled. In this regard, the Board is committed to maintaining and promoting the principles of good corporate
governance.
The Directors of VDM Group are of the view that VDM Group has complied in all substantial respects with corporate
governance best practice in Australia, including the ASX Corporate Governance Council Corporate Governance
Principles and Recommendations (“Guidelines”). ASX Listing Rules require VDM Group to disclose in its Annual
Report its practices and policies relating to the Guidelines.
This statement reflects the corporate governance practices and policies in place for VDM Group during the 2013
financial year.
Each year the Board reviews the Company’s corporate governance practices and policies to ensure that they reflect
corporate governance developments and assist VDM Group in maintaining robust corporate performance and
accountability.
Each year the Board reviews and confirms all charters, codes and policies relating to the Guidelines. As a result of the
recent review the majority of the Corporate Governance practices and policies were reaffirmed with only minor
alterations.
The major change to the policies was the introduction of a Policy for Equal Employment Opportunities.
The corporate governance charters, codes and policies currently adopted by the Company can be viewed on the
Company’s website .
The Company’s corporate governance statement is structured with reference to the Principles and Recommendations
of the Guidelines, which are as follows:
PRINCIPLE 1 – LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
Recommendation 1.1 – Companies should establish the functions reserved to the Board and those delegated to
senior executives and disclose those functions.
The Company complies with this recommendation.
The Company has established a Board Charter, which sets out the role, composition and responsibilities of the Board
within the governance structure of the VDM Group. The Board Charter sets out the following key responsibilities and
functions of the Board:
to develop, review and monitor the VDM Group’s long-term business strategies and provide strategic
direction to senior executives
to ensure policies and procedures are in place to safeguard the VDM Group’s assets and business and to
enable the VDM Group to act ethically and prudently
to develop and promote a system of corporate governance which ensures the VDM Group is properly
managed and controlled
to identify the VDM Group’s principal risks and ensure that it has in place appropriate systems of risk
management, internal control, reporting and compliance and that management is taking appropriate action to
minimise those risks
to review and approve the VDM Group’s financial statements
to monitor management’s performance and the VDM Group’s consolidated financial results on a regular
basis
to appoint, appraise and determine the remuneration and benefits of the chief executive officer
to delegate powers to the chief executive officer as necessary to enable the day-to-day business of the VDM
Group to be carried on, and to regularly review those delegations
to ensure that the VDM Group has in place appropriate systems to comply with relevant legal and regulatory
requirements that impact on its operations
to determine the appropriate capital management for the VDM Group including share and loan capital and
dividend payments
to determine and regularly review an appropriate remuneration policy for employees of the VDM Group.
27
VDM GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
For the year ended 30 June 2013
The Board has developed and reviews at least every 12 months a formal instrument of delegation to the chief
executive officer. The instrument contains all necessary powers to enable the chief executive officer to conduct
business of the VDM Group on a day-to-day basis. The Board requires the chief executive officer to report at least
every 12 months on the exercise of certain delegated powers, in particular sub-delegated authorities, to other senior
executives.
The Board has established the following committees to streamline the discharge of its responsibilities:
Audit and Risk Committee
Nominations and Remuneration Committee
Each new non-executive director is required to sign and return a letter of appointment which sets out the key terms of
the director’s appointment. The content of the letters of appointment for new non-executive directors is consistent with
the ASX principles.
The Company also has formal employment contracts with its managing director, senior executives and chief financial
officer which describe, amongst other things, their term of office, duties, rights, responsibilities and entitlements on
termination.
Recommendation 1.2 – Companies should disclose the process of evaluating the performance of senior executives.
The chief executive officer conducts a formal review each year assessing the performance of senior executives and
reports back to the Board.
PRINCIPLE 2 – STRUCTURE THE BOARD TO ADD VALUE
Recommendation 2.1 – A majority of the Board should be independent directors.
The Company complies with this recommendation, as six of the seven directors are independent.
The Board considers that its structure has been appropriate in the context of the VDM Group’s current operations. The
Board considers that each of the directors possess skills and experience required for managing and developing the
VDM Group and believes any additional information or advice can be more appropriately and economically obtained
from independent external expert consultants.
Assessment of Directors Independence
The Board is comprised of both executive and non-executive directors with a majority of non-executive directors. Non-
executive directors bring a fresh perspective to the Board’s consideration of strategic, risk and performance matters
and are best placed to exercise independent judgment and review and constructively challenge the performance of
management.
The Board Charter states that an independent director:
is not a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a
substantial shareholder of the Company
within the last three years has not been employed in an executive capacity by the VDM Group, or been a
director after ceasing to hold any such employment
within the last three years has not been a principal of a material professional advisor or a material consultant
to the VDM Group or an employee materially associated with the service provided
is not a material supplier or customer of the VDM Group or an officer of or otherwise associated directly or
indirectly with a material supplier or customer, has no material contractual relationship with the VDM Group
other than as a director of the Company
has not served on the Board for a period, which could or could reasonably be perceived to, materially
interfere with the director’s ability to act in the best interests of the Company
is free from any interest and any business or other relationship which could or could reasonably be perceived
to, materially interfere with the directors’ ability to act in the best interests of the Company.
28
VDM GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
For the year ended 30 June 2013
The Board has adopted ASSB Standard 1031 to determine the levels of materiality. A relationship is presumed
immaterial when it generates less than 5% and presumed material when it generates more than 10% of revenue of
the VDM Group over a 12 month period in the absence of evidence or convincing argument to the contrary. In
considering such evidence or argument, VDM Group considers the strategic value and other material but non-
quantitative aspects of the relationship in question. The threshold for materiality for the purposes of assessing the
materiality of relationships between a non-executive director and VDM Group (other than in their capacity as a
director) shall be judged according to the significance of the relationship to the director in the context of their activities
as a whole.
The independent directors of the Company are:
•
•
•
•
•
M Perrott AM (Chairperson)
B Nazer (Chairperson of the Audit and Risk Committee)
R Mickle (Chairperson of the Nominations and Remuneration Committee)
M Fry
X Ru
Independent Decision-making
Each director has the right under the Board Charter to seek independent professional advice on matters of concern.
Such advice will be at the expense of the VDM Group, if approval is first given by the chairperson. During the financial
year no directors sought to obtain such independent legal accounting and other professional advice.
Recommendation 2.2 – The chairperson should be an independent director.
The Company complies with this recommendation.
Recommendation 2.3 – The roles of chairperson and chief executive officer should not be exercised by the same
individual.
The Company complies with this recommendation.
Recommendation 2.4 – The Board should establish a nomination committee.
The Company complies with this recommendation.
The purpose of the Nominations and Remuneration Committee is to assist and advise the Board on matters relating to
the appointment and remuneration of directors, the chief executive officer and other senior executives and employees
of the VDM Group.
The role of the committee in relation to nomination is to:
review the size and composition of the Board
review and advise the Board on the range of skills available on the Board and appropriate balance of skills
for future Board membership
review and consider succession planning for the chief executive officer, the chairperson and other directors
and key executives
develop criteria and procedures for the identification of candidates for appointment as directors, with the
criteria including a consideration of the candidate’s:
skills, experience, expertise and personal qualities
capability to devote the necessary time and commitment to the role
potential conflicts of interest and independence
apply the criteria and procedures to identify prospective candidates for appointment as a director and make
recommendations to the Board
make recommendations to the Board regarding any directors who should not continue in office, having
regard to the results of a formal performance appraisal of directors and/or consideration of the appropriate
composition of the Board
nominate for approval by the Board external experts (where appropriate) to advise on the matters listed
above
review the time required from a non-executive director and whether directors are meeting this requirement
evaluate management’s recommendations on the appointment of key executives
develop a plan for identifying, assessing and enhancing director competencies
ensure that there is an appropriate induction program for new directors and members of senior management
and reviewing its effectiveness.
29
VDM GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
For the year ended 30 June 2013
The role of the committee in relation to remuneration is to:
determine remuneration policies and remuneration of directors
determine remuneration and incentive policies and packages of key executives
determine the VDM Group’s recruitment, retention and termination policies and procedures for senior
management
determine and review incentive plans and require that equity-based incentive plans involving the issue of new
securities to executives, other than directors, be approved by shareholders, prior to implementation and that
such plans prohibit hedging of unvested options
determine and review superannuation arrangements of the VDM Group
determine and review professional indemnity and liability insurance for directors and senior management.
The charter of the Nominations and Remuneration Committee provides that at least three directors, with the majority
being independent directors, shall comprise the committee. The chairperson of the committee shall be the chairperson
of the Board or an independent director. The Board has adopted a formalised policy for the appointment of non-
executive directors. The current committee comprises:
R Mickle (Chairperson)
B Nazer
M Fry
D Hua
X Ru
Recommendation 2.5 – Companies should disclose the process of evaluating the performance of the Board, its
committees and individual directors.
At the commencement of each financial year the Board establishes performance targets. Each year the Board
undertakes for the previous financial year a self-assessment of its collective performance and the assistance provided
to it by its various Board committees. Senior executives and executive directors are assessed against previously
agreed key performance indicators by the chief executive officer and the findings communicated to the independent
directors. The performance of the chief executive officer is reviewed by the Nominations and Remuneration
Committee.
PRINCIPLE 3 – PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING
Recommendation 3.1 – Companies should establish a code of conduct and disclose the code or a summary of the
codes as to:
practices necessary to maintain confidence in the Company’s integrity
the practices necessary to take into account their legal obligations and the reasonable expectations of their
stakeholders
the responsibility and accountability of individuals for reporting and investigating reports of unethical practice.
The Company complies with this recommendation.
The Company has a Code of Conduct (“Code”) which is endorsed by the Board and applies to all directors and
employees. The Code is regularly reviewed and updated as necessary to ensure it reflects the highest standards of
behaviour and professionalism and the practices necessary to maintain confidence in the Company’s integrity.
The objective of the Code is to:
provide a benchmark for professional behaviour throughout the VDM Group
support the VDM Group’s business reputation and corporate image within the community
make employees aware of the consequences if they breach the Code.
In summary, the Code requires that at all times the VDM Group personnel act with the utmost integrity, objectivity and
in compliance with the letter and the spirit of the law and the VDM Group policies.
The Code contains statements of commitments to employees, clients, shareholders, governments and communities.
In addition, the Code deals with compliance with and respect for the law, fair dealing, equal opportunity and anti-
discrimination, occupational health and safety, disclosure of the VDM Group’s information and securities dealing,
conflicts of interest, gifts, prizes and entertainment, improper use or theft of property or assets.
The Code of Conduct is available on the Company’s website.
30
VDM GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
For the year ended 30 June 2013
Recommendation 3.2 – Companies should establish a policy concerning diversity and disclose the policy or a
summary of that policy. The policy should include requirements for the Board to establish measurable objectives for
achieving gender diversity for the Board to assess annually both the objectives and progress in achieving them.
The Company complies with this recommendation.
The Company has a Diversity Policy which is endorsed by the Board. VDM Group is committed to providing a diverse
work environment in which everyone is treated fairly and with respect. This policy applies to directors and employees
of VDM Group.
The Board will establish measurable objectives for achieving gender diversity and will review these objectives
annually. The Nominations and Remuneration Committee will have the responsibility of assessing and reporting to the
Board VDM Group’s progress towards achieving the measurable objectives on an annual basis. The Nominations and
Remuneration Committee will also have the responsibility of recommending to the Board the extent to which the
achievement of measurable diversity objectives will be linked to the key performance indicators for the Board, chief
executive officer and senior executives.
The Diversity Policy is available on the Company’s website.
Recommendation 3.3 – Companies should disclose in each annual report the measurable objectives for achieving
gender diversity set by the Board in accordance with the diversity policy and progress towards achieving them.
The Company complies with this recommendation.
The measurable objectives set by the Board for achieving gender diversity of the Code is to:
Establish a Diversity sub-committee
Appoint a member of the executive management group responsible for diversity
Ensure recruitment policies and procedures reflect VDM Group’s position on diversity
Diversity sub-committee to provide an initial report to the Nominations and Remuneration Committee by
August 2011, and then to report to the Committee on an half yearly basis
Establish programs which aim to increase female participation in the construction, contracting and
engineering sectors and women in leadership roles
Implement regular diversity education and training for all employees and contractors, and periodically
conduct awareness sessions on issues related to equal opportunities in the workplace
Issue guidance notes on the VDM Group’s commitment to diversity to all external agencies engaged to
provide recruitment services
The Company has achieved all objectives set by the Board.
Recommendation 3.4 – Companies should disclose in each annual report the proportion of women employees in the
whole organisation, women in senior executive positions and women on the Board.
The Company complies with this recommendation.
The proportion of women:
employees at VDM Group: 21% (2012: 22%)
in senior executive positions: 25% (2012: 0%)
on the Board: 0% (2012: 0%)
PRINCIPLE 4 – SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
Recommendation 4.1 – The Board shall establish an audit committee.
The Company complies with this recommendation.
The Audit and Risk Committee’s primary responsibilities are to assist the Board in:
fulfilling its overview of the audit process
overviewing financial reporting
fulfilling its overview of the systems of internal control which the Board and management have established
its processes of risk management and in monitoring compliance with corporate policies, the code of conduct
and corporate governance and risk management policies generally.
31
VDM GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
For the year ended 30 June 2013
The charter of the Audit and Risk Committee provides for at least three directors to comprise the committee, but
recognises that this may not be practicable at all times given its size and composition. The chairperson of the
committee is appointed by the Board. The committee chairperson is an independent non-executive director. The chief
financial officer and any other individual may attend meetings at the invitation of the chairperson of the committee, but
are not members of the committee. The current committee comprises:
B Nazer (Chairperson)
M Fry
D Hua
Recommendation 4.2 – The Audit Committee should be appropriately structured.
The Company considers that it complies with this requirement.
The Audit Committee:
consists only of independent directors
is chaired by an independent chairperson who is not chairperson of the Board
has at least two members.
Recommendation 4.3 – The Audit Committee should have a formal operating charter.
The Company complies with this recommendation.
The charter sets out the committee’s purpose, membership role, responsibilities and functions relating to financial
reporting, auditors and risk, as well as committee administrative procedures.
The charter of the Audit Committee is available on the Company’s website.
PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE
Recommendation 5.1 – Companies should establish written policies designed to ensure compliance with ASX Listing
Rule disclosure requirements and to ensure accountability at senior management level for that compliance and
disclose those policies or a summary of those policies.
The Company complies with this recommendation.
The purpose of the Market Disclosure Policy is to establish procedures for:
identifying material price-sensitive information
reporting such information to the reporting officer for review
ensuring the Company achieves best practice in complying with its continuous disclosure obligations under
the Corporations Act and ASX Listing Rules
ensuring the VDM Group, the Board and key senior management do not contravene the Corporations Act or
ASX Listing Rules.
The rules set out in the policy are designed to ensure that announcements made by the Company are:
made in a timely manner
factual
do not omit material information
are expressed in concise and clear language that allows shareholders and the market to assess the impact
of the information when making investment decisions.
This policy applies to directors, executive officers and members of senior management who are most likely to be in
possession of, or become aware of, the relevant information. All staff have been made aware of the existence of the
policy so that they can assist with reporting of potentially sensitive information to the appropriate persons within the
VDM Group.
The Market Disclosure Policy is available on the Company’s website.
32
VDM GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
For the year ended 30 June 2013
PRINCIPLE 6 – RESPECT THE RIGHTS OF SHAREHOLDERS
Recommendation 6.1 – Companies should design a communications policy for promoting effective communication
with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of
that policy.
The Company complies with this recommendation.
The Communications Policy is based on compliance with the Company’s disclosure obligations and aims at all times
to achieve best practice. The Communications Policy commits the Company to facilitating shareholder participation in
the member meetings and to dealing promptly with shareholder enquiries. The Company believes that communicating
with shareholders by electronic means, particularly through its website, is an efficient way of distributing information in
a timely, convenient manner.
The Company’s Communication Policy is available on the Company’s website.
PRINCIPLE 7 – RECOGNISE AND MANAGE RISK
Recommendation 7.1 – Companies should establish policies for the oversight and management of material business
risks.
The Company complies with this recommendation.
The Risk Management Policy is designed to assist in the development of organisational capabilities in risk
management for internal control purposes.
Recommendation 7.2 – The Board should require management to design and implement the risk management and
internal control system to manage the Company’s material business risks and report to it on whether those risks are
being managed effectively.
Risk management is regarded as an integral part of the Company’s strategic planning, business planning and
investment/project appraisal procedures. The focus of risk management is the identification and treatment of risks with
the objective to add maximum sustainable value to all of the activities of the organisation.
The Risk Management Policy has been established to assist in the development of organisational capabilities in risk
management. The Risk Management Policy sets out the following rules and responsibilities:
The Board is ultimately responsible for the risk management and internal control framework of the VDM
Group.
The Board shall regularly review the effectiveness of the risk management and internal control framework.
The Board will review and discuss strategic risks and opportunities arising from changes in the VDM Group’s
business environment regularly and on an as-needs basis.
The Board has delegated some of its responsibilities to the Audit and Risk Committee; however, maintains
the overall responsibility for the process.
The responsibility for undertaking and assessing risk management and internal control effectiveness is
delegated to management. Management is required to report back to the Board through the Audit and Risk
Committee on the efficiency and effectiveness of risk management.
The Company maintains a risk register which is currently a quarterly agenda item for Board meetings.
Recommendation 7.3 – The Board should disclose whether it has received assurance from the chief executive officer
and the chief financial officer that:
the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound
system of risk management and internal control
the system is operating effectively in all material respects in relation to the financial reporting risks.
In accordance with the Board’s policy, the chief executive officer and the chief financial officer made the attestations
required by Recommendation 7.3 prior to the Board signing the annual report.
33
VDM GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
For the year ended 30 June 2013
PRINCIPLE 8 – REMUNERATE FAIRLY AND RESPONSIBLY
Recommendation 8.1 – The Board should establish a remuneration committee.
The Company complies with this recommendation.
The Nominations and Remuneration Charter sets out the committee’s purpose, membership including procedures for
attendance by non-members, its role and administrative procedures.
The purpose of the Nominations and Remuneration Committee is to assist and advise the Board on matters relating to
the appointment and remuneration of directors, the chief executive officer and other senior executives and employees
of the VDM Group.
The commentary under Recommendation 2.4 summarises the role of the committee in relation to remuneration. Each
member of the executive team signs a formal employment contract at the time of their appointment covering a range
of matters including duties, rights, responsibilities and entitlements on termination. The current remuneration of the
directors and selected senior executives is published in the Directors’ Report and Notes to the Financial Statements.
These Notes also describe the Company’s remuneration principles and policies.
The Charter of the Nominations and Remunerations Committee is available on the Company’s website.
Recommendation 8.2 – The remuneration committee should be structured so that it:
consists of a majority of independent directors
is chaired by an independent chair
has at least three members.
The Company complies with this recommendation.
Recommendation 8.3 – Clearly distinguish the structure of non-executives directors’ remuneration from that of
executives.
The non-executive directors of the Company are entitled to a fee that is determined by the Nominations and
Remuneration Committee. The fee may include superannuation contributions. Additional fees are periodically payable
for participation on Board committees. Non-executive directors do not participate in equity plans of the Company and
do not receive retirement benefits other than statutory entitlements.
Guidelines for Information
Recommendations 1.3, 2.6, 3.3, 4.4, 5.2, 6.2 and 7.4 – The Company should provide the information in the Guide for
reporting principles.
The Company considers that the level of information disclosed satisfies these recommendations.
The Company’s website contains the following corporate governance charters, codes
and policies:
Board Charter
Audit and Risk Committee Charter
Nominations and Remunerations Committee Charter
Guidelines for the Operation of the Board of Directors
Code of Conduct
Appointment and Selection of non-executive directors
Communications Policy
Market Disclosure Policy
Securities Dealing Policy
Risk Management Policy
Equal Opportunity Policy
Whistle Blower Protection Policy
Diversity Policy
34
VDM GROUP LIMITED
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2013
Continuing operations
Rendering of services
Other revenue
Revenue
Cost of services
Gross loss
Administration expenses
Finance costs
Impairment charge
Share based payment write-back / (expense)
Loss from continuing operations before income tax
Income tax (expense) / benefit
Loss from continuing operations after income tax
Discontinued operations
Loss from discontinued operations after income tax
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
Total comprehensive loss for the year is attributable to:
Owners of the parent
Earnings per share (cents per share)
Basic, loss for the year attributable to ordinary equity
holders of the parent
Diluted, loss for the year attributable to ordinary equity
holders of the parent
Earnings per share for continuing operations (cents
per share)
Basic, loss from continuing operations attributable to
ordinary equity holders of the parent
Diluted, loss from continuing operations attributable to
ordinary equity holders of the parent
Notes
5
7(b)
7(d)
30
8(a)
9
10
10
10
10
Consolidated
2012
$’000
2013
$’000
204,563
643
205,206
(239,457)
(34,251)
229,713
1,022
230,735
(241,430)
(10,695)
(12,874)
(233)
(19,486)
90
(66,754)
(14,905)
(81,659)
(15,176)
(786)
(3,161)
(329)
(30,147)
3,127
(27,020)
(2,749)
(84,408)
(27,792)
(54,812)
-
(84,408)
-
(54,812)
(84,408)
(84,408)
(54,812)
(54,812)
(9.04)
(7.81)
(9.04)
(7.81)
(8.74)
(3.85)
(8.74)
(3.85)
35
VDM GROUP LIMITED
STATEMENT OF FINANCIAL POSITION
As at 30 June 2013
ASSETS
Current assets
Cash and cash equivalents
Term deposit
Trade and other receivables
Contracts in progress
Inventory
Development properties
Other assets
Non-current assets classified as held for sale
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Deferred tax assets
Intangible assets and goodwill
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Amounts due to customers for contract work
Current tax liabilities
Deferred tax liability
Interest-bearing loans and borrowings
Provisions
Total current liabilities
Non-current liabilities
Interest-bearing loans and other borrowings
Provisions
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Equity attributable to equity holders of the parent
Contributed equity
Reserves
Accumulated losses
Parent interests
TOTAL EQUITY
Notes
Consolidated
2012
$’000
2013
$’000
12
13
14
15
17
16
18
19
14
20
8
21
22
15
8
23
24
23
24
25
26
26
11,857
5,238
12,507
7,848
308
5,411
728
43,897
900
44,797
258
6,359
-
307
6,924
51,721
26,840
7,200
3,152
-
1,782
9,872
48,846
299
244
543
49,389
2,332
10,029
13,568
48,736
19,656
952
5,529
2,342
100,812
1,295
102,107
-
12,847
16,156
23,154
52,157
154,264
48,896
3,546
3,145
918
2,468
7,519
66,492
128
495
623
67,115
87,149
248,286
884
(246,838)
2,332
2,332
248,612
967
(162,430)
87,149
87,149
36
VDM GROUP LIMITED
STATEMENT OF CASH FLOWS
For the year ended 30 June 2013
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
GST paid
Income tax refunded
Net cash flows used in operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Release from / (investment in) term deposit
Proceeds from sale of property, plant and equipment
Purchase of intangibles
Loans to related entities
Proceeds from external loans
Payment of settlement adjustments
Net proceeds from sale of subsidiary
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Transaction costs on issue of shares
Proceeds from share placements
Net cash flows used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
27(a)
24(i)
9
12
Consolidated
2012
$’000
2013
$’000
319,022
(324,548)
455
(243)
(6,837)
-
(12,151)
343,880
(353,435)
481
(2,095)
(9,121)
3,987
(16,303)
(3,320)
8,330
9,674
(195)
-
1,634
(707)
1,130
16,546
995
(3,513)
(49)
-
(2,567)
1,828
10,029
11,857
(7,511)
(13,568)
15,909
(158)
(63)
-
(187)
43,107
37,529
2,055
(39,281)
(2,524)
36,255
(3,495)
17,731
(7,702)
10,029
37
VDM GROUP LIMITED
STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2013
Issued
capital
$’000
Accumulated
losses
$’000
Equity
reserve
$’000
Other capital
reserve
$’000
Balance at 1 July 2012
248,612
(162,430)
457
510
Comprehensive loss for the year
Total comprehensive loss for the
year
Transactions with owners in their
capacity as owners
Reversal of tax benefits on capital
raising costs in prior years
Transactions costs on share and
option issue
Share-based payments
-
-
(84,408)
(84,408)
(268)
(51)
(7)
-
-
-
-
-
-
-
-
Balance at 30 June 2013
248,286
(246,838)
457
Balance at 1 July 2011
214,112
(107,618)
1,074
Comprehensive loss for the year
Total comprehensive loss for the
year
Transactions with owners in their
capacity as owners
Issue of shares
Exercise of bonus option issue
Transactions costs on share and
option issue
Tax benefit of transaction costs
Settlement adjustments paid on prior
acquisitions
Stamp duty paid on prior acquisitions
Share-based payments
Balance at 30 June 2012
-
-
(54,812)
(54,812)
36,238
17
(2,524)
758
-
-
11
-
-
-
-
-
-
-
248,612
(162,430)
-
-
-
-
-
-
(149)
(468)
-
457
-
-
-
-
(83)
427
192
-
-
-
-
-
-
-
-
318
510
Total
$’000
87,149
(84,408)
(84,408)
(268)
(51)
(90)
2,332
107,760
(54,812)
(54,812)
36,238
17
(2,524)
758
(149)
(468)
329
87,149
38
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
INDEX
1. CORPORATE INFORMATION
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
4. SEGMENT INFORMATION
5. OTHER REVENUE
6. OTHER INCOME
7. EXPENSES
8. INCOME TAX
9. DISCONTINUED OPERATIONS
10. EARNINGS PER SHARE
11. DIVIDENDS PROPOSED AND PAID
12. CASH AND CASH EQUIVALENTS
13. TERM DEPOSITS
14. TRADE AND OTHER RECEIVABLES
15. CONTRACTS IN PROGRESS
16. DEVELOPMENT PROPERTIES
17. INVENTORY
18. OTHER CURRENT ASSETS
19. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE
20. PROPERTY, PLANT AND EQUIPMENT
21. INTANGIBLE ASSETS AND GOODWILL
22. TRADE AND OTHER PAYABLES
23. INTEREST-BEARING LOANS AND OTHER BORROWINGS
24. PROVISIONS
25. CONTRIBUTED EQUITY
26. RETAINED EARNINGS AND RESERVES
27. CASHFLOW STATEMENT INFORMATION
28. RELATED PARTY DISCLOSURE
29. KEY MANAGEMENT PERSONNEL
30. SHARE-BASED PAYMENT PLANS
31. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
32. PARENT ENTITY INFORMATION
33. COMMITMENTS
34. CONTINGENCIES
35. SIGNIFICANT EVENTS AFTER THE BALANCE DATE
36. AUDITORS’ REMUNERATION
37. CLOSED GROUP CLASS ORDER DISCLOSURES
40
40
50
52
55
55
55
57
59
60
61
61
61
62
63
63
63
63
64
64
66
67
68
69
69
70
71
72
74
77
79
82
83
84
85
85
86
39
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
1.
CORPORATE INFORMATION
The consolidated financial statements of VDM Group Limited for the year ended 30 June 2013 was authorised for issue in
accordance with resolution of the directors on 26 September 2013. VDM Group Limited is a for-profit company limited by
shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian Securities Exchange.
The nature of the operations and principal activities of VDM Group are described in the Directors Report.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of
the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian
Accounting Standards Board. The financial report has also been prepared on the historical cost basis. The financial report
is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise
stated. VDM Group is a for profit entity.
Compliance with IFRS
The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board.
New and amended accounting standards and interpretations
VDM Group has adopted all new and amended Australian Accounting Standards and AASB Interpretations from 1 July 2012
mandatory for annual reporting periods beginning on or after 1 July 2012. The adoption of these new and amended Standards
and Interpretations did not have any effect on the financial position or performance of VDM Group.
The following standards and interpretations have been issued by the AASB but are not yet effective for the period ending
30 June 2013. VDM Group has not elected to early adopt any other new Standards or amendments that are issued but not
yet effective. VDM Group is still evaluating the impact of these standards.
Reference
Title
AASB 10
Consolidated Financial Statements
AASB 11
Joint Arrangements
AASB 12
Disclosure of Interests in Other Entities
AASB 13
Fair Value Measurement
AASB 119
Employee Benefits
Application
date of
standard*
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
AASB 2012-2
Amendments to Australian Accounting standards – Disclosures – Offsetting Financial Assets
and Financial Liabilities
1 January 2013
AASB 2012-5
Amendments to Australian Accounting standards arising from Annual Improvements 2009-
2011 Cycle
1 January 2013
AASB 2012-9
Amendments to AASB 1048 arising from the withdrawal of Australian Interpretation 1039
1 January 2013
AASB 2011-4
Amendments to Australian Accounting Standards to Remove Individual Key Management
Personnel Disclosure Requirements [AASB 124]
1 July 2013
AASB 1053
Application of Tiers of Australian Accounting Standards
1 July 2013
AASB 2012-3
Amendments to Australian Accounting standards –Offsetting Financial Assets and Financial
Liabilities
1 January 2014
Interpretation 21
Levies
1 January 2014
40
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
Reference
Title
AASB 9
Financial Instruments
Notes:
* Designates the beginning of the applicable annual reporting period unless otherwise stated.
Going concern
Application
date of
standard*
1 January 2015
VDM Group incurred a net loss after tax from continuing operations for the year ended 30 June 2013 of $84,408,000
(2012: $54,812,000). Net cash flows used in operating activities was $12,151,000 (2012: $16,303,000). At 30 June 2013,
VDM Group had net current liabilities of $4,049,000 (2012: $35,615,000 net current assets), including non-current assets
held for sale of $900,000 (2012: $1,295,000). The cash position of VDM Group at 30 June 2013 was $11,857,000 (2012:
$10,029,000) with a further $5,238,000 (2012: $13,568,000) in short term deposits which were not available for immediate
use.
This report has been prepared on the going concern basis, which contemplates the continuity of normal business activity
and the realisation of assets and settlement of liabilities in the normal course of business. In forming this view, the
directors have taken into consideration:
the additional loan facility of up to $4,000,000 to be provided by H&H to VDM Group and ongoing support by H&H
to the development of the Company’s new business strategy;
the successful completion of the entitlement offer to its shareholders to raise up to approximately $9,250,000;
the re-structure of the business and associated reduction in personnel in order to right size the business
commensurate with work activity;
the potential for recovery of significant moneys through the resolution of outstanding claims and variations with
clients. The value of contingent revenue exceeds $12,000,000. All costs associated with the contingent revenue
have been fully expensed during 2013; and
the successful implementation of the new business strategy and the ability to leverage off H&H’s Australian and
Chinese relationships and global experience in mining and construction sectors; which is likely to incorporate an
expansion of VDM Group . In addition to enhancing VDM Group’s current construction operations, VDM Group
proposes to increase exposure to the resources value chain through the establishment of engineering procurement
and mining business arms. VDM Group recognises that the previous business model did not work; and
should VDM Group not achieve the matters set out above, there is material uncertainty as to whether VDM Group will
continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course
of business and at the amounts stated in the annual financial report. The annual financial report does not include any
adjustments to assets and liabilities that may be necessary if VDM Group is unable to continue as a going concern.
(a) Basis of consolidation
The consolidated financial statements comprise the financial statements of VDM Group Limited and its subsidiaries as at
and for the year ended 30 June each year.
Subsidiaries are all those entities over which VDM Group has the power to govern the financial and operating policies so
as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether a group controls another entity.
The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using
consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances and
transactions, income and expenses and profit and losses resulting from intragroup transactions have been eliminated in
full.
Subsidiaries are fully consolidated from the date on which control is obtained by VDM Group and cease to be consolidated
from the date on which control is transferred out of VDM Group.
Investments in subsidiaries held by VDM Group Limited are accounted for at cost in the separate financial statements of
the parent entity less any impairment charges. Dividends received from subsidiaries are recorded as a component of other
revenues in the separate income statement of the parent entity, and do not impact the recorded cost of the investment.
Upon receipt of dividend payments from subsidiaries, the parent will assess whether any indicators of impairment of the
carrying value of the investment in the subsidiary exist. Where such indicators exist, to the extent that the carrying value of
the investment exceeds its recoverable amount, an impairment loss is recognised.
41
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
A change in the ownership interest of a subsidiary that does not result in a loss of control, is accounted for as an equity
transaction.
Non-controlling interests are allocated their share of net profit after tax in the statement of comprehensive income and are
presented within equity in the consolidated statement of financial position, separately from the equity of the owners of the
parent.
Losses are attributed to the non-controlling interest even if that results in a deficit balance.
If VDM Group loses control over a subsidiary, it:
Derecognises the assets (including goodwill) and liabilities of the subsidiary;
Derecognises the carrying amount of any non-controlling interest;
Derecognises the cumulative translation differences, recorded in equity;
Recognises the fair value of the consideration received;
Recognises the fair value of any investment retained;
Recognises any surplus or deficit in profit or loss;
Reclassifies the parent's share of components previously recognised in other comprehensive income to profit or
loss.
(b) Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the
aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling
interest in the acquiree. For each business combination, VDM Group elects whether it measures the non-controlling
interest in the acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-
related costs are expensed as incurred in administrative expenses.
When VDM Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic conditions, the VDM Group’s operating
or accounting policies and other pertinent conditions as at the acquisition date. This includes the separation of embedded
derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity
interest in the acquiree is remeasured at fair value as at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be
recognised in accordance with AASB 139 either in profit or loss or in other comprehensive income. If the contingent
consideration is classified as equity, it shall not be remeasured.
Prior to 1 July 2009
Business combinations were accounted for using the purchase method. Transaction costs directly attributable to the
acquisition formed part of the acquisition costs.
(c) Operating segments reporting – refer note 4
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and
incur expenses (including revenues and expenses relating to transactions with other components of the same entity),
whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about
resources to be allocated to the segment and assess its performance and for which discrete financial information is
available. This includes start up operations which are yet to earn revenues. Management will also consider other factors in
determining operating segments such as the existence of a line manager and the level of segment information presented
to the Board of Directors.
Operating segments have been identified based on the information provided to the chief operating decision makers – being
the executive management team.
VDM Group aggregates two or more operating segments when they have similar economic characteristics, and the
segments are similar in each of the following respects:
Nature of the products and services,
Type or class of customer for the products and services,
Methods used to distribute the products or provide the services, and if applicable,
Nature of the regulatory environment.
42
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an
operating segment that does not meet the quantitative criteria is still reported separately where information about the
segment would be useful to users of the financial statements.
Information about other business activities and operating segments that are below the quantitative criteria are combined
and disclosed in a separate category for “all other segments”.
(d) Foreign currency translation
Functional and presentation currency
Both the functional and presentation currency of the Company and its Australian subsidiaries is Australian dollars (A$).
Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of
exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rate as at the date of the initial transaction.
(e) Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original
maturity of three months or less that are readily convertible to cash and which are subject to an insignificant risk of changes in
value.
For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined
above, net of outstanding bank overdrafts. Bank overdrafts are included within interest bearing loans and borrowings in current
liabilities on the balance sheet.
(f) Trade and other receivables
Trade receivables, which generally have 30-60 day terms, unless otherwise contractually agreed, are recognised initially at
fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for impairment.
Other debtors are settled on an at-call basis and are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method, less an allowance for impairment.
Collectibility of trade and other receivables is reviewed on an ongoing basis at an operating unit level. Individual debts that
are known to be uncollectible are written off when identified. An impairment allowance is recognised when there is
objective evidence that VDM Group will not be able to collect the receivable. Financial difficulties of the debtor, default
payments or debts more than 60 days overdue are generally considered objective evidence of impairment. The amount of
the impairment loss is the receivable carrying amount compared to the present value of estimated future cash flows,
discounted at the original effective interest rate.
Receivables from related parties are recognised and carried at the amortised cost due less allowance for impairment. All
receivables are repayable on demand.
(g) Inventories and development properties
Inventories and development properties are measured at the lower of cost or net realisable value. Net realisable value is the
estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs
necessary to make the sale. Where held at cost, cost comprises all costs of purchase, cost of conversion and costs incurred
bringing the inventories or development properties to their present location or condition. Inventory is measured on a first in, first
out basis.
43
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
(h) Contracts in progress
Contracts in progress are valued at cost plus profit recognised to date based on the value of work completed, less provision for
foreseeable losses.
Costs include both variable and fixed costs directly related to specific contracts. Those costs that are expected to be incurred
under penalty clauses and warranty provisions are also included.
When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated
with the construction contract is recognised as revenue and expenses respectively by reference to the stage of completion
of the contract activity at the end of the reporting period. An expected loss on the construction contract is recognised as an
expense immediately as soon as the loss is foreseeable.
In the case of a fixed price contract, the outcome of a construction contract can be estimated reliably when all the following
conditions are satisfied:
total contract revenue can be measured reliably;
it is probable that the economic benefits associated with the contract will flow to the entity;
both the contract costs to complete the contract and the stage of contract completion at the end of the reporting
period can be measured reliably; and
the contract costs attributable to the contract can be clearly identified and measured reliably so that actual contract
costs incurred can be compared with prior estimates
In the case of a cost plus contract, the outcome of a construction contract can be estimated reliably when all the following
conditions are satisfied:
it is probable that the economic benefits associated with the contract will flow to the entity; and
the contract costs attributable to the contract, whether or not specifically reimbursable, can be clearly identified and
measured reliably.
(i) Non-current assets and disposal groups held for sale
Non-current assets and disposal groups are classified as held for sale and measured at the lower of their carrying amount and
fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction. They are not
depreciated or amortised. For an asset or disposal group to be classified as held for sale, it must be available for immediate
sale in its present condition and its sale must be highly probable.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs
to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not
in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the
sale of the non-current asset (or disposal group) is recognised at the date of derecognition.
(j)
Interests in jointly controlled operations
VDM Group has interests in joint ventures through jointly controlled operations. A joint venture is a contractual
arrangement whereby two or more parties undertake an economic activity that is subject to joint control. A jointly controlled
operation involves use of assets and other resources of the venturers rather than establishment of a separate entity. VDM
Group recognises its interest in the jointly controlled operation by recognising its interest in the assets and the liabilities of
the joint venture. VDM Group also recognises the expenses that it incurs and its share of the income that it earns from the
sale of goods or services by the jointly controlled operation.
(k) Property, plant and equipment
Property, plant and equipment is stated at historic cost less accumulated depreciation and any accumulated impairment
losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts
is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant
and equipment as a replacement only if it is eligible for capitalisation. All other repairs and maintenance are recognised in
profit or loss as incurred.
Depreciation is calculated on a straight-line and diminishing balance method over the estimated useful life of the specific
assets as follows: -
Land – not depreciated
Buildings – over 40 years
Leasehold improvements – over 3 to 10 years
Plant and equipment – over 3 to 15 years
44
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
The assets’ residual values, useful lives and amortisation methods are reviewed and adjusted if appropriate, at each financial
year end.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected
from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the item) is included in the income statement in the period the item is
derecognised.
(l) Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfillment of an arrangement is dependent on the use of a specific asset or assets and
the arrangement conveys a right to use the asset.
VDM Group as a lessee
Finance leases, which transfer to VDM Group substantially all the risks and benefits incidental to ownership of the leased item,
are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum
lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in
profit or loss.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is
no reasonable certainty that VDM Group will obtain ownership by the end of the lease term.
Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.
Operating lease incentives are recognised as a liability when received and subsequently reduced by allocating lease payments
between rental expense and reduction in liability.
(m) Impairment of non-financial assets other than goodwill
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 tested for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
VDM Group conducts an annual internal review of asset values, which is used as a source of information to assess for any
indicators of impairment. External factors, such as changes in expected future processes, technology and economic
conditions, are also monitored to assess for indicators of impairment. If any indication of impairment exists, an estimate of
the asset's recoverable amount is calculated.
An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows that 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 tested for possible reversal of the impairment whenever events or changes
in circumstances indicate that the impairment may have reversed.
(n) Goodwill
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business
combination over VDM Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent
liabilities.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to
each of the VDM Group’s cash-generating units, or groups of cash generating units, that are expected to benefit from the
synergies of the combination, irrespective of whether other assets or liabilities of VDM Group are assigned to those units or
groups of units.
Goodwill is reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the
carrying value may be impaired.
Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. The
impairment testing involves using a value in use, discounted cashflow methodology for all the cash generating units to which
goodwill has been allocated.
45
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
When the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised.
When goodwill forms part of a cash-generating unit and an operation within that unit is disposed of, the goodwill associated with
the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of
the operation. Goodwill disposed of in this manner is measured based on the relative values of the operation disposed of and
the portion of the cash-generating unit retained.
Impairment losses recognised for goodwill are not subsequently reversed.
(o) Intangible assets
Intangibles
Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible
asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible
assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated
intangible assets, excluding capitalised development costs, are not capitalised and expenditure is taken to the statement of
comprehensive income in the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised
over the useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The
amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each
financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits
embodied in the asset are accounted for prospectively by changing the amortisation period or method, as appropriate, which is
a change in accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in
the expense category consistent with the function of the intangible asset.
Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit
level consistent with the methodology outlined for goodwill above. Such intangibles are not amortised. The useful life of an
intangible asset with an indefinite life is reviewed each reporting period to determine whether indefinite life assessment
continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for as a change
in an accounting estimate and is thus accounted for on a prospective basis.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.
Research and development costs
Research costs are expensed as incurred. An intangible asset arising from development expenditure on an internal project
is recognised only when VDM Group can demonstrate the technical feasibility of completing the intangible asset so that it
will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate
future economic benefits, the availability of resources to complete the development and the ability to measure reliably the
expenditure attributable to the intangible asset during its development.
Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried
at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure so capitalised is
amortised over the period of expected benefit from the related project. Amortisation is recognised in the income statement
in the line “administrative expenses”.
The carrying value of an intangible asset arising from development expenditure is tested for impairment annually when the
asset is not yet available for use, or more frequently when an indication of impairment arises during the reporting period.
Amortisation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Software – 2.5 years
Development costs – 5 years
(p) Trade and other payables
Trade and other payables are carried at amortised cost due to their short term nature and are not discounted. They
represent liabilities for goods and services provided to VDM Group prior to the end of the financial year that are unpaid and
arise when VDM Group becomes obliged to make future payments in respect of the purchase of these goods and services.
The amounts are unsecured and are usually paid within 30 days of recognition.
Payables to related parties are carried at amortised cost. Interest, when charged by the lender, is recognised as an
expense using the effective interest method.
46
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
(q) Interest bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable
transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the
effective interest method. Fees paid on the establishment of loan facilities that are yield related are included as part of the
carrying amount of the loans and borrowings.
Borrowings are classified as current liabilities unless VDM Group has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
Except as explained below, borrowing costs are recognised as an expense when incurred. VDM Group currently has
development properties which meet the definition of a qualifying asset. As such, the borrowing costs directly associated
with the qualifying development properties are capitalised in the cost of the asset.
(r) Provisions and employee benefits
Provisions are recognised when VDM Group has a present obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
Where VDM Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the
reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to
any provision is presented in the income statement net of any reimbursement.
Provisions are measured at the present value of management's best estimate of the expenditure required to settle the
present obligation at the balance sheet date using a discounted cash flow methodology. If the effect of the time value of
money is material, provisions are discounted using a current pre-tax rate that reflects the time value of money and the risks
specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs.
Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave due to be settled
within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date. They are
measured at the amounts expected to be paid when the liabilities are settled. Expenses for non-accumulating sick leave are
recognised when the leave is taken and are measured at the rates paid or payable. Where a period end falls between pay
dates an accrual is raised for any unpaid wages and salaries at the period end.
Long service leave
The liability for long service leave 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 reporting date 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 reporting date on national government
bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows.
(s) Share based payment transactions
Equity settled transactions
Senior executives of VDM Group receive share-based payment transactions (equity-settled) as part of their TEC (total
employment cost).
The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined by an external valuer using a binomial model,
further details of which are given in note 30.
In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the
price of the shares of VDM Group (market conditions) if applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which
the performance and service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees
become fully entitled to the award (the vesting date).
At each subsequent reporting date until vesting, the cumulative charge to the income statement is the product of:
(i)
(ii)
the grant date fair value of the award;
the current best estimate of the number of awards that will vest, taking into account such factors as the likelihood
of employee turnover during the vesting period and the likelihood of non-market performance conditions being
met; and
47
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
(iii)
the expired portion of the vesting period.
The charge to the income statement for the period is the cumulative amount as calculated above less the amounts already
charged in previous periods. There is a corresponding entry to equity.
Equity-settled awards granted by VDM Group to employees of subsidiaries are recognised in the parent's separate
financial statements as an additional investment in the subsidiary with a corresponding credit to equity. As a result, the
expense recognised by VDM Group in relation to equity-settled awards only represents the expense associated with grants
to employees of the parent. The expense recognised by VDM Group is the total expense associated with all such awards.
Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than
were originally anticipated to do so. Any award subject to a market condition is considered to vest irrespective of whether
or not that market condition is fulfilled, provided that all other conditions are satisfied.
The terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been
modified. An additional expense is recognised for any modification that increases the total fair value of the share-based
payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and
designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were
a modification of the original award, as described in the previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted
earnings per share (note 10).
Shares in VDM Group reacquired on-market are classified and disclosed as reserved shares and deducted from equity
(see note 2 (u)).
(t) Contributed equity
Ordinary shares
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.
Reserved shares
VDM Group's own equity instruments, which are reacquired for later use in employee share based payment arrangements
(reserved shares) are deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or
cancellation of VDM Group's own equity instruments.
(u) Revenue recognition
Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent that it is
probable that the economic benefits will flow to VDM Group and the revenue can be reliably measured. The following specific
recognition criteria must also be met before revenue is recognised:
Sale of Goods
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the cost
incurred or to be incurred in respect of the transaction can be measured reliably. Risks and rewards of ownership are
considered passed to the buyer at the time of delivery of the goods to the customers.
Sale of development properties
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the cost
incurred or to be incurred in respect of the transaction can be measured reliably. Transfer of the risks and rewards of ownership
coincides with the transfer of the legal title.
Construction and infrastructure development projects
Revenue from construction and infrastructure development projects is recognised in the financial year in which the activities are
performed on a percentage of completion method or, where an independent third party provides an estimate of the stage of
works completed, based on the independent third party assessment. Where the percentage to complete method is used, it is
based on the cost incurred to date over anticipated total contract costs.
Where it is probable that total contract costs will exceed total contract revenue for a contract, the excess of costs over revenue
is recognised as an expense immediately. Where the contract outcome cannot be measured reliably, revenue is recognised
only to the extent expenses recognised are recoverable.
48
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
Rendering of services
Revenue from consulting services is recognised by reference to the stage of completion of a contract or contracts in progress at
balance sheet date or at the time of completion of the contract and billing to the customer. Stage of completion is assessed by
reference to the work performed.
Where the contract outcome cannot be measured reliably, revenue is recognised only to the extent expenses recognised are
recoverable.
Interest
Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised
cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the
rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying
amount of the financial asset.
Dividends
Revenue is recognised when the shareholders’ right to receive the payment is established.
Rental income
Rental income from investment properties is accounted for on a straight-line basis over the lease term. Contingent rental
income is recognised as income in the periods in which it is earned. Lease incentives granted are recognised as an integral part
of the total rental income.
(v) Income tax and other taxes
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or
paid to the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted by the balance sheet date.
Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all
taxable temporary differences except:
when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss; or
when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint
ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and
unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:
when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of
an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss; or
when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint
ventures, in which case a deferred tax asset is recognised only to the extent that it is probable that the temporary
difference will reverse in the foreseeable future and taxable profit will be available against which the temporary
difference can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is
no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be
utilised.
Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it
has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the
balance sheet date.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation
authority.
49
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
Tax consolidation legislation
VDM Group Limited and its wholly-owned Australian controlled entities implemented the tax consolidation legislation as of 1
July 2004.
VDM Group Limited and the controlled entities in the tax consolidated group continue to account for their own current and
deferred tax amounts. VDM Group has applied the group allocation approach in determining the appropriate amount of current
taxes and deferred taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, VDM Group Limited also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax
consolidated group.
Assets and liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in VDM Group. Details of the tax funding agreement are disclosed in note 8.
Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which
case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable;
and
receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in
the balance sheet.
Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from
investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as part of
operating cashflows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
(w) Earnings per share
Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of
servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus
element.
Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:
Costs of servicing equity (other than dividends);
The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been
recognised as expenses; and
Other non-discretionary changes in revenues or expenses during the period that would result from the dilution of
potential ordinary shares.
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus
element.
3.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect
the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to
assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and estimates on historical
experience and on other various factors it believes to be reasonable under the circumstances, the result of which form the basis
of the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions and conditions.
Management has identified the following critical accounting policies for which significant judgements, estimates and
assumptions are made. Actual results may differ from these estimates under different assumptions and conditions and may
materially affect financial results or the financial position reported in future periods.
Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial
statements.
50
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
(a) Determination of percentage of completion of contracts
Contract revenue is recognised as revenue in the income statement using the percentage of completion method in the
reporting periods in which the work is performed. The percentage complete is calculated on:
actual costs over the sum of actual plus projected costs to complete the contract, or
in the case where VDM Group participates in joint contracts and VDM Group’s costs are not representative of
overall contract costs, based on the percentage of VDM Group’s costs to the total estimated cost for VDM Group
associated with that project, or
in the case where there is an independent assessment of the percentage complete, based on the independent
assessment.
Contract costs are recognised as an expense in the income statement in the reporting periods in which the work to which
they relate is performed. Any expected excess of total contract costs over total contract revenue for the contract is
recognised as an expense immediately.
(b) Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences, where management considers that it is probable that
future taxable profits will be available to utilise those temporary differences.
(c) Impairment testing of goodwill
Goodwill is tested for impairment each reporting period or if an impairment indicator exists. Impairment indicators include
divisional product and service delivery performance, technology, economic and political environments and future budget
expectations. This requires an estimation of the recoverable amount of the cash-generating units, using a value in use
discounted cash flow methodology, to which goodwill is allocated. The assumptions used in this estimation of recoverable
amount and carrying amount of goodwill including a sensitivity analysis are discussed in note 21.
(d) Impairment of non-financial assets other than goodwill
VDM Group assesses impairment of all non-financial assets other than goodwill at each reporting date by evaluating conditions
specific to VDM Group and to the particular asset that may lead to impairment. These include product and service delivery
performance, technology, economic and political environments and future product expectations. If an impairment indicator
exists the recoverable amount of the asset is determined. Given the current uncertain economic environment, management
considered that the indicators of impairment were significant enough and as such the non financial assets other than goodwill
have been tested for impairment in this financial period.
(e) Share-based payment transactions
VDM Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined with the assistance of an external valuer using a
binomial model, with the assumptions detailed in note 30. The accounting estimates and assumptions relating to equity-settled
share based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting
period but may impact expenses and equity.
(f) Estimation of useful lives of assets
The estimation of the useful lives of assets has been based on historical experience as well as manufacturers’ warranties (for
plant and equipment) and lease terms (for lease equipment). In addition, the condition of the assets is assessed at least once
per year and considered against remaining useful life. Adjustments to useful lives are made when considered necessary.
Depreciation charges are included in note 20.
(g) Capitalised development costs
Development costs are capitalised by VDM Group when it can be demonstrated that the technical feasibility of completing the
intangible asset is valid so that the asset will be available for use or sale.
(h) Accounting for outstanding litigations
Where VDM Group is involved with outstanding litigation, provisions are raised where claims against VDM Group are probable
and are able to be measured, at the best estimate of the expenditure required to settle the obligation at the reporting date.
Where claims are not able to be reliably measured or are subject to future events not wholly within control of the Group,
disclosure is made by way of a contingent liability note (note 34).
51
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
4.
SEGMENT INFORMATION
For management purposes, VDM Group is organised into business units based on location and nature of services
provided and has three reportable segments, as follows:
Eastern construction;
Western construction; and
Consulting.
The services provided by each segment are as follows:
Eastern and Western construction services
Building
Remote area camp and village accommodation
Non process infrastructure including workshops, airports, control buildings, warehouses and ammonium nitrate
stores
Civil
Bulk earthworks
Land development
Marine and port infrastructure
Roads and bridges
Water and wastewater
Concrete structures
Eastern and Western consulting services
Building services consulting
Civil engineering
Environmental consulting
Marine engineering
Structural engineering
Traffic engineering
Infrastructure
Industrial
Transport
Water
Master planning
Town planning
Building design
Project management
The reportable segments are based on aggregated operating segments determined by the similarity of the location and
services provided, as these are the sources of VDM Group’s major risks and have the most effect on the rates of return.
Management monitors the operating results of its business units separately for the purpose of making decisions about
resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss
and is measured consistently with operating profit or loss in the consolidated financial statements.
Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third
parties. Inter entity sales and cost of sales are recognised on an arm’s length basis and eliminated on consolidation.
Income tax expense is calculated based on the segment operating net profit using a notional charge of 30% (2012: 30%).
No effect is given for taxable or deductible temporary differences.
It is VDM Group’s policy that if items of revenue and expense are not allocated to operating segments then any associated
assets and liabilities are also not allocated to segments. This is to avoid asymmetrical allocations within segments which
management believe would be inconsistent.
Corporate charges and other associated assets and liabilities are not allocated to operating segments as they are not
considered part of the core operations of any segment
VDM Group is actively pursuing options to divest parts of the consulting business. As such management restructured its
internal reporting during the year and now present discrete information based on the location and the nature of the
services provided. The comparatives have been restated as a result of changes in the internal reporting which is used and
reviewed by the chief operating decision makers in assessing performance and allocating resources.
52
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
The following table presents revenue and profit and selected balance sheet information for reportable segments for the
years ended 30 June 2013 and 30 June 2012.
Year ended 30 June 2013
Revenue
External sales
Other external revenue
Inter-segment sales
Total segment revenue
Results
Segment result after tax
Interest income
Interest expense (note 7(b))
Depreciation and amortisation (note 7(c))
Impairment of goodwill, assets, non-
current assets classifies as held for sale
and development properties (note 7(d))
Income tax benefit
Reconciliation of segment net profit
after tax to net loss before tax
Segment net profit after notional tax
Notional income tax benefit at 30%
excluding impairment charge (2012: 30%)
Corporate charges
Net loss before tax per the statement of
comprehensive income
Segment assets1
Segment operating assets
Capital expenditure
Discontinued operation
Segment liabilities1
Segment operating liabilities
Note:
Western
construction
$’000
Eastern
construction
$’000
Consulting
$’000
Elimination
and
unallocated
$’000
Total
$’000
127,077
59,716
242
-
2
-
127,319
59,718
17,778
21
1,223
19,022
(8)
204,563
378
(1,223)
643
-
(853)
205,206
(37,897)
(3,615)
(1,796)
36
(69)
(2,572)
2
(37)
(622)
(17,088)
(1,905)
8,918
733
21
-
(273)
-
769
-
(43,308)
378
(127)
(475)
437
(233)
(3,942)
(493)
(19,486)
-
10,420
(43,308)
(10,420)
(13,026)
(66,754)
17,215
507
13,079
224
7,792
585
13,635
51,721
2,144
3,460
55
3,515
31,321
9,671
2,085
6,312
49,389
1.
Intercompany transactions have been removed from the segment assets and liabilities.
Major customers
VDM Group has a number of customers to which it provides services. During 2013, VDM Group had three customers
that contributed greater than 10% of revenue. The two largest customers each contributed 20% of revenue and were
reported under Western Construction and Eastern Construction Segments. The third largest customer contributed 11%
of revenue and was reported under Western Construction.
53
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
Western
construction
$’000
Eastern
construction
$’000
Consulting
$’000
Elimination
and
unallocated
$’000
Total
$’000
140,723
103
10,600
151,426
57,289
149
-
57,438
(6,501)
(1,370)
45
(75)
(4,281)
(311)
2,653
14
(37)
(610)
-
587
23,817
22
3,303
27,142
(230)
23
(7)
(667)
-
99
7,884
229,713
748
1,022
(13,903)
-
(5,271)
230,735
-
(8,101)
315
(667)
(729)
397
(786)
(6,287)
(2,850)
(3,161)
-
3,339
(8,101)
(3,339)
(18,707)
(30,147)
80,013
15,748
10,480
35,236
141,477
872
217
390
(97)
12,787
154,264
1,382
6,287
7,669
52,408
9,921
2,290
(2,697)
61,922
5,193
67,115
Year ended 30 June 2012
Revenue
External sales
Other external revenue
Inter-segment sales
Total segment revenue
Results
Segment result after tax
Interest income
Interest expense (note 7(b))
Depreciation and amortisation (note 7(c))
Impairment of assets and development
costs and software (note 7(d))
Income tax benefit
Reconciliation of segment net profit
after tax to net loss before tax
Segment net profit after notional tax
Notional income tax expense at 30%
excluding impairment charge (2011: 30%)
Corporate charges
Net loss before tax per the statement of
comprehensive income
Segment assets
Segment operating assets
Discontinued operations assets
Total assets
Capital expenditure
Discontinued operation capital expenditure
Total capital expenditure
Segment liabilities
Segment operating liabilities
Discontinued operations liabilities
Total liabilities
Major customers
In 2012, VDM Group had two customers that contributed greater than 10% of revenue. The largest customer contributed
17% of revenue and the second largest contributed 11% of revenue. Both customers were reported under Western
Construction.
54
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
Unallocated assets
Cash and bank
Trade and other receivables
Development properties
Other debtors
Non-current assets classified as held for sale
Property, plant and equipment
Deferred tax assets
Intangible assets
Unallocated liabilities
Trade and other payables
Current tax liabilities
Interest-bearing loans and borrowings
Deferred tax liabilities
Provisions
2013
$’000
6,581
836
4,736
174
900
230
178
13,635
626
3,152
1,460
-
1,074
6,312
Consolidated
2012
$’000
14,815
(4,765)
4,740
2,169
1,295
490
16,156
336
35,236
(11,186)
3,145
2,128
918
2,298
(2,697)
All revenue is generated from external customers in Australia. All non-current assets are located in Australia.
5. OTHER REVENUE
Interest
Rental income
Other
Total other revenue
6. OTHER INCOME
Gain on disposal of property, plant and equipment
Total other income
Other income included in cost of services
7. EXPENSES
(a) Other expenses
Loss on disposal of property, plant and equipment
Loss on foreign exchange
Total other expenses
Other expenses included in cost of services
Other expenses included in administration expenses
(b) Finance costs
Finance charges payable under hire purchase contracts
Bank loans and overdrafts
Total finance costs
437
206
-
643
3,766
3,766
3,766
383
-
383
10
373
87
146
233
397
124
501
1,022
2,224
2,224
2,224
308
5
313
27
286
179
607
786
55
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
(c) Depreciation and amortisation
Depreciation
Amortisation of development costs and software
Total depreciation and amortisation
Depreciation and amortisation included in cost of services
(d) Impairment charges
Impairment of goodwill (note 21)
Impairment of assets
Impairment of development properties (note 16)
Impairment of non-current assets held for sale (note 19)
Impairment of property, plant and equipment (note 20)
Total impairment charges
(e) Employee benefits expense
Wages and salaries
Restructuring/ redundancy costs
Superannuation expense
Share based payment expense / (write-back)
Other employee benefits expense
Total employee benefits expense
Employee benefit expenses included in cost of services
Employee benefit expenses included in administration expenses
2013
$’000
3,601
342
3,943
3,467
18,507
370
214
395
-
19,486
80,026
901
4,945
(90)
1,324
87,106
82,272
4,834
Consolidated
2012
$’000
5,513
774
6,287
5,575
-
-
2,004
846
311
3,161
77,879
230
4,524
329
1,851
84,813
77,237
7,576
56
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
8. INCOME TAX
(a) Income tax expense
Income statement
Current income tax:
Income tax benefit on adjustments in respect of current income
tax of previous years
Deferred income tax:
Relating to origination & reversal of temporary differences
Prior year tax losses no longer recognised
Losses recognised
Adjustments in respect of deferred income tax of previous years
Income tax expense / (benefit) reported in the income statement
Statement of changes in equity
Deferred income tax:
Paid up capital
Income tax expense / (benefit) reported in equity
2013
$’000
Consolidated
2012
$’000
-
3,544
234
14,685
-
(14)
14,905
877
-
(7,548)
-
(3,127)
268
268
(758)
(758)
(b) Numerical reconciliation between aggregate tax expense recognised in the income statement and the tax
expense calculated in the statutory income tax return
Accounting loss before tax from continuing operations
Accounting loss before tax from discontinued operations
Accounting loss before income tax
Prima facie income tax benefit @ 30%
Employee share based payments
Non deductible items
Unrecognised deductible temporary differences
Prior year tax losses no longer recognised
Other adjustments – discontinued operations
Prior year over provision
Aggregate income tax expense / (benefit)
Income tax expense / (benefit) reported in the consolidated income
statement
Income tax expense / (benefit) attributed to discontinued operations
Aggregate income tax expense / (benefit)
(66,754)
(2,684)
(69,438)
(20,831)
(27)
6,953
14,203
14,686
-
(14)
14,970
14,905
65
14,970
(30,147)
(27,800)
(57,947)
(17,384)
99
10,267
9
1,380
(1,050)
3,544
(3,135)
(3,127)
(8)
(3,135)
57
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
(c) Recognised deferred tax asset and liabilities
Statement of financial
position
2012
$’000
2013
$’000
Statement of comprehensive
income
2012
$’000
2013
$’000
Consolidated
Deferred tax liabilities
Contracts in progress and inventory
Other
Gross deferred tax liabilities
Deferred tax assets
Provision for employee entitlements
Provisions – other
Recognised income tax revenue losses
Trade and other receivable
Trade and other payables
Other assets
Property, plant and equipment
Contributed equity
Discontinued operations
Other
Deferred tax assets not recognised
Gross deferred tax assets
Deferred tax expense
Net deferred tax asset recognised in the balance
sheet
(d) Tax losses
(2,447)
(306)
(2,753)
(5,904)
(5,904)
1,294
73
-
872
3,481
-
483
571
-
449
(4,470)
2,753
1,649
149
14,685
911
1,173
-
483
839
-
1,253
21,142
-
15,238
(3,457)
306
(3,151)
355
76
14,685
40
(2,308)
-
-
268
(65)
803
4,470
18,324
15,173
(2,152)
(2,152)
460
13
(7,548)
(1,486)
4,048
870
318
(489)
8
(1,470)
(5,276)
(7,428)
VDM Group has recognised a deferred tax asset of $nil (2012: $14,685,000) for Australian income tax revenue losses of
$nil (2012: $48,951,000) on the basis that it is not ‘probable’ that the carried forward revenue loss will be utilised against
future assessable taxable profits.
VDM Group has estimated tax losses of $98,226,000 (2012: $48,951,000)
(e) Unrecognised temporary differences
At 30 June 2013, there are no unrecognised temporary differences associated with VDM Group’s investments in
subsidiaries, or joint ventures, as VDM Group has no liability for additional taxation should unremitted earnings be remitted
(2012: nil).
(f) Tax consolidation
Members of the tax consolidation group and the tax sharing arrangement
VDM Group and its 100% owned Australian resident subsidiaries formed a tax consolidated group with effect from 1 July
2004. VDM Group Ltd is the head entity of the tax-consolidated group. Members of VDM Group have entered into a tax
sharing agreement that provides for the allocation of income tax liabilities between the entities should the head entity
default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this
agreement on the basis that the possibility of default is remote.
58
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
Tax effect accounting by members of the tax consolidated group
Tax expense/ income benefit, deferred tax liabilities and deferred tax assets arising from temporary differences are
recognised in the separate financial statements of the members of the tax consolidated group using the group allocation
method. Current tax liabilities and assets and deferred tax assets and liabilities arising from unused tax losses and tax
credits of the members of the tax consolidated group are recognised by the Company (as head entity in the tax
consolidated group).
Members of the tax-consolidated group have entered into a tax funding agreement. Amounts are recognised as payable to
or receivable by the Company and each member of the tax consolidated group in relation to the current tax liability paid or
payable by the subsidiaries. Current tax liabilities in the subsidiaries are reflected back to the parent entity by way of
specific tax loan accounts calculated and based on taxable income.
9. DISCONTINUED OPERATION
On 28 February 2013, VDM Group announced that it had entered into a non-binding sale agreement to sell one of its
wholly owned business units, Como by way of a buy-out by the existing Como management team. The sale to CE
Acquisitions Pty Ltd, a company related to the existing Como management team, was completed on 10 April 2013 at a
consideration of $5,450,000 (pre transaction costs). Como was previously reported in the mechanical and mineral process
engineering segment. The business has been recognised as a discontinued operation and is no longer disclosed in the
segment note.
The comparative discontinued operation results include the sale of Cape Crushing and Earthmoving Contractors Pty
Limited, which was completed on 19 April 2012.
Financial performance of discontinued operation
Revenue
Expenses
Finance costs
Loss on re-measurement to fair value less costs to sell
Plant and equipment
Goodwill (note 21)
Loss on sale of discontinued operations
Tax (expense) / benefit
Loss from discontinued operations
Earnings per share from discontinued operations
Basic, loss for the year, from discontinued operations (cents per
share)
Diluted, loss for the year from discontinued operations (cents per
share)
Assets and liabilities and cash flow information of the disposed entity
Assets
Cash and cash equivalents
Plant and equipment
Intangible assets
Contracts in progress
Trade receivables
Other assets
Liabilities
Trade and other liabilities
Provision for employee entitlements
Net assets attributable to discontinued operations
2013
$’000
23,666
(22,336)
(10)
-
(4,004)
(2,684)
(65)
(2,749)
(0.29)
(0.29)
3,869
1,063
126
427
2,205
142
7,832
2,353
480
2,833
4,999
2012
$’000
96,133
(90,339)
(1,310)
(10,146)
(22,138)
(27,800)
8
(27,792)
(3.96)
(3.96)
59
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
Sale proceeds
Transactions costs
Net proceeds
Less cash and cash equivalents
Net cash flows from disposals
Net cash flows
Operating
Investing
Financing
Net cash (outflow) / inflow
10.
EARNINGS PER SHARE
The following reflects the information used in the basic earnings per share
computations:
(a) Loss used in calculating loss per share
Net loss from continuing operations attributable to ordinary equity holders of
the parent
Net loss from discontinued operations attributable to ordinary equity holders
of the parent
Net loss attributable to ordinary equity holders of the parent for basic
earnings
2013
$’000
5,450
(451)
4,999
3,869
1,130
(168)
2,315
(20)
2,127
2013
$’000
Consolidated
2012
$’000
(81,659)
(27,020)
(2,749)
(27,792)
(84,408)
(54,812)
Consolidated
2012
2013
(b) Weighted average number of shares
Weighted average number of ordinary shares for basic and diluted earnings
per share
933,884,774
701,956,091
In addition, there are 482,818,773 share options outstanding at 30 June 2013 (2012: 499,474,615), which have been
excluded from the calculation of diluted earnings per share that could potentially dilute basic earnings per share in the
future. The share options are antidilutive as at 30 June 2013.
On 28 August 2013, 140,080,961 ordinary shares were issued at 1 cent per share fully paid pursuant to the share
subscription agreement between VDM Group and H&H. In addition to the share placement, a convertible loan of
$5,000,000 was issued to H&H with a conversion price of 1.0 cent per share (conversion subject to shareholder approval
at the forthcoming AGM).
On 29 October 2013, VDM Group announced it is proposing to make a pro-rata entitlement offer to its Shareholders to
subscribe for Shares at a price of $0.01 per Share seeking to raise at least $9,250,000 (Rights Issue).
60
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
11. DIVIDENDS PROPOSED AND PAID
(a) Declared and paid during the year:
Dividends on ordinary shares:
Final fully franked dividend for 2012: nil cents per share (2011: nil
cents per share)
Interim fully franked dividend for 2013: nil cents per share (2012: nil
cents per share)
(b) Dividend proposed, not recognised as a liability:
Final fully franked dividend for 2013: nil cents per share (2012: nil
cents per share)
(c) Franking credits:
Franking credits available for the subsequent financial year:
- franking account balance as at the end of the financial year at
30% (2012: 30%)
- franking debits that will arise from the refunds of income tax
receivable as at the end of the financial year
Franking credits available for future periods
(d) Tax rates:
The tax rate at which paid dividends have been franked is 0%.
12. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Total cash and cash equivalents
Consolidated
2012
$’000
2013
$’000
-
-
-
-
-
-
-
-
3,459
-
3,459
3,459
-
3,459
11,857
11,857
10,029
10,029
Cash at bank earns interest at floating rates based on daily or term bank deposit rates.
Reconciliation to cash flow statement
For the purposes of the Cash Flow Statement, cash and cash equivalents comprise the following at 30 June:
Cash at bank and in hand
Total cash for reconciliation of cash flow statement
11,857
11,857
10,029
10,029
13. TERM DEPOSIT
Term deposits
Total term deposits
5,238
5,238
13,568
13,568
Under the terms of the agreement with its principal banker and bond provider, VDM Group is required to place on deposit
amounts as surety for bank guarantees and bonds issued in favour of VDM Group. The cash placed on deposit was not
available for immediate use. The 30 June 2012 comparative balances have been restated to correctly reclassify the term
deposits.
61
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
14. TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Allowance for impairment loss
Other debtors
Retentions
Loans to related entities (note 28)
Impairment of related loans and other debtors
Total current receivables
Non-Current
Loan receivable
(a) Ageing of trade receivables
0-30 days
31- 60 days
> 60 days PDNI
> 60 days CI
PDNI – Past due but not impaired
CI – Considered impaired
(b) Allowance for impairment loss
Balance at 1 July
Charge for the year
Utilised
At 30 June
Trade receivables are non-interest bearing and are generally on 30-60 day terms. An allowance for impairment loss is
recognised when there is objective evidence that an individual trade receivable is impaired. An impairment loss of
$2,714,000 (2012: $956,000 impairment loss) has been recognised by VDM Group.
(c) Fair value and credit risk
Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair values.
The maximum exposure to credit risk is the fair value of receivables.
(d) Foreign exchange and interest rate risk
Details regarding foreign exchange and interest rate risk exposure are disclosed in note 31.
(e) Related party receivables
For terms and conditions of related party receivables refer to notes 28 and 29.
2013
$’000
Consolidated
2012
$’000
12,684
(2,907)
9,777
2,256
1,143
788
(1,457)
12,507
258
258
5,639
2,741
1,397
2,907
12,684
3,462
2,714
(1,812)
4,364
42,169
(2,674)
39,495
4,352
4,889
788
(788)
48,736
-
-
29,057
5,904
4,534
2,674
42,169
4,168
956
(1,662)
3,462
62
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
15. CONTRACTS IN PROGRESS
Contract costs incurred to date
Profit recognised to date (less recognised losses)
Less progress billings
Total construction contracts in progress
Represented by:
Amounts due from customers for contract work
Amounts due to customers for contract work
Total construction contacts in progress
Amounts due from customers for contract work
Other work in progress
Total contracts in progress
Amounts due to customers for contract work
Other
Total amounts due to customers for contract work
Once billed, credit quality is expected to be the same as disclosed in note 14(c).
16. DEVELOPMENT PROPERTIES
Development properties
Total development properties
2013
$’000
Consolidated
2012
$’000
218,217
(228)
(217,801)
188
260,460
6,019
(251,554)
14,925
7,388
(7,200)
188
7,388
460
7,848
(7,200)
-
(7,200)
18,413
(3,488)
14,925
18,413
1,243
19,656
(3,488)
(58)
(3,546)
5,411
5,411
5,529
5,529
Development properties include a 42.75% interest in a property via the Bussell Highway Joint Venture arrangement and a
52% interest in a property held in the Quartz Trust.
No interest was capitalised during the 2013 financial year (2012 : nil).
(a) Reconciliation of carrying amounts
At 1 July
Transfer from inventory
Additions
Impairment of development properties (note 16(b))
At 30 June
(b) Impairment of development properties
5,529
-
95
(214)
5,411
6,517
790
226
(2,004)
5,529
An impairment loss of $214,000 (2012: $2,004,000) was recognised in the statement of comprehensive income in the
2013 financial year. The recoverable amount was based on a independent valuations obtained during the period on the
properties.
17. INVENTORY
Consumables at cost
Total inventories
18. OTHER CURRENT ASSETS
Prepayments
Total other current assets
308
308
728
728
952
952
2,342
2,342
63
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
19. NON-CURRENT ASSETS CLASSIFIED AS HELD
FOR SALE
Other property, plant and equipment
Total non-current assets classified as held for sale
(a) Reconciliation of carrying amounts
At 1 July
Transferred in
Sale
Transfer from / (to) property, plant and equipment (note 20(a))
Impairment
At 30 June
2013
$’000
900
900
1,295
-
(950)
950
(395)
900
Consolidated
2012
$’000
1,295
1,295
13,011
2,465
(12,142)
(1,193)
(846)
1,295
The non-current assets classified as held for sale at 30 June 2013 relate to property acquired on settlement of a legacy
contract. It is the intention to divest the property. Recoverable amount was estimated for the property and an impairment
loss of $395,000 (2012: $846,000) was recognised and included in the impairment charge in the statement of
comprehensive income. The asset has not been allocated to a reportable segment in note 4.
On 17 January 2013, VDM Group accepted an offer of $3,000,000 for the sale of freehold land and buildings classified as
a non-current asset held for sale. The sale was completed on 15 March 2013.
20. PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements at cost
Accumulated depreciation
Freehold land and buildings at cost
Accumulated depreciation
Plant and equipment under lease at cost
Accumulated depreciation and impairment
Plant and equipment at cost
Accumulated depreciation and impairment
Total property, plant and equipment
2013
$’000
1,043
(135)
908
-
-
-
2,381
(1,267)
1,114
16,035
(11,698)
4,337
6,359
2012
$’000
723
(108)
615
950
-
950
1,944
(1,075)
869
28,891
(18,478)
10,413
12,847
64
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
(a) Reconciliation of carrying amount
Leasehold improvements
At 1 July net of accumulated depreciation
Additions
Disposals
Depreciation
Discontinued operations (note 9)
Transferred from plant & equipment and plant & equipment under
lease
At 30 June net of accumulated depreciation
Freehold land and buildings
At 1 July net of accumulated depreciation
Transferred to non-current assets held for sale (note 19)
At 30 June net of accumulated depreciation
Plant and equipment under lease
At 1 July net of accumulated depreciation
Additions
Disposals
Depreciation
Transferred from / (to) plant & equipment and leasehold
improvements
Discontinued operations (note 9)
At 30 June net of accumulated depreciation
Plant and equipment
At 1 July net of accumulated depreciation
Additions
Disposals
Depreciation
Transferred (to) / from plant & equipment under lease and
leasehold improvements
Transfer from non-current assets classified as held for sale (note 19(a))
Discontinued operations at cost (note 9)
Impairment (note 20(c))
At 30 June net of accumulated depreciation
Total property, plant and equipment
(b) Plant and equipment pledged as security for liabilities
2013
$’000
Consolidated
2012
$’000
615
2,511
(2,061)
(172)
(13)
28
908
950
(950)
-
869
734
(130)
(368)
77
(68)
1,114
10,413
771
(3,130)
(3,165)
(105)
-
(447)
-
4,337
6,359
502
405
(124)
(99)
(452)
383
615
950
-
950
37,689
3,143
(430)
(2,434)
(3,305)
(33,794)
869
23,777
6,964
(1,297)
(6,453)
2,922
1,193
(16,382)
(311)
10,413
12,847
Included in the balances above are assets of VDM Group to the value of $1,114,000 (2012: $869,000) granted as security
for hire purchase debts. There are floating charges over the remaining property, plant and equipment, refer to Note 23 (c)
for details of plant and equipment pledged as security for borrowings.
(c) Impairment of property, plant and equipment
Within VDM Group, recoverable amount was estimated for property, plant and equipment based on current market value.
There was no impairment loss (2012: $311,000) recognised in the statement of comprehensive income to reduce the
carrying amount of plant and equipment to its recoverable amount. There was no reversal of impairment charges
recognised in prior periods.
(d) Transfers
During the year ended 30 June 2013, freehold land and building to the value of $950,000 was transferred from property,
plant and equipment to non-current assets classified as held for sale.
Consolidated
65
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
21. INTANGIBLE ASSETS AND GOODWILL
Goodwill
Software
Accumulated amortisation and impairment
Total intangibles assets and goodwill
(a) Reconciliation of carrying amounts
Goodwill
At 1 July
Impairment of goodwill
Discontinued operations (note 9)
At 30 June
Software
At 1 July net of accumulated amortisation
Additions
Disposals
Amortisation
Discontinued operations (note 9)
At 30 June net of accumulated amortisation
2013
$’000
2012
$’000
-
22,511
4,090
(3,783)
307
307
4,258
(3,615)
643
23,154
22,511
(18,507)
(4,004)
-
44,649
-
(22,138)
22,511
643
195
(35)
(370)
(126)
307
1,268
183
-
(808)
-
643
(b) Description of VDM Group’s intangible assets and goodwill
Goodwill
After initial recognition, goodwill acquired in a business combination was measured at cost less any accumulated
impairment losses. Goodwill was not amortised but was subject to impairment testing on an annual basis or whenever
there was an indication of impairment.
(c) Impairment losses recognised for goodwill
Goodwill was assessed at the half year ended 31 December 2012 which resulted in an impairment loss of $18,507,000
recognised for continuing operations. There was no impairment loss recognised during the year ended 30 June 2012.
The impaired goodwill related to Eastern Operations ($1,790,000) and Western Operations ($16,717,000). When
assessing the carrying value of goodwill, a range of possible revenue and earnings outcomes were reviewed. The half
year ended 31 December 2012 saw significant volatility in resources markets in which VDM Group predominantly
operated that caused clients to defer, cancel or reduce their capital expenditure budgets. To account for the volatility
in its markets and the reductions in expected capital expenditure budgets of its client base, VDM Group used forecast
revenue and earnings toward the lower end of the range of possible outcomes.
(d) Impairment tests for goodwill
(i) Description of cash generating units and other relevant information
Goodwill acquired through business combinations was allocated to and was tested at the half year ended 31 December
2012 at the level of its respective cash generating units, each of which was both an operating segment and a reportable
segment for impairment testing as follows:
Western Operations cash generating unit; and
Eastern Operations cash generating unit.
The recoverable amount of the Western and Eastern cash generating units was determined based on a value in use
calculation using cash flow projections based on financial budgets approved by management covering a five year period.
The discount rate applied to the cash flow projections was 13.5% (30 June 2012: 13.6%) and cash flows beyond the five-
year period was extrapolated using a 0% growth rate. The average growth rates adopted in the budget for Western and
Eastern Operations was 2.4%. The average growth rates adopted approximated the expected long term average growth
rate for the engineering and construction industries in general in the current economic climate.
66
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
(ii) Carrying amount of goodwill allocated to each of the
cash generating units
Eastern operations
Western operations
Mechanical and mineral process engineering
Total goodwill
2013
$’000
-
-
-
-
Consolidated
2012
$’000
1,790
16,717
4,004
22,511
(iii) Key assumptions used in value in use calculation for cash generating units
The calculation of value in use for all cash generating units was most sensitive to the following assumptions:
Volume of construction work executed on an annual basis,
Gross profit margins on construction contracts and non-project overhead costs,
Discount rates,
Growth rates to extrapolate cash flows beyond the budget period, and
Cash flow projections.
Discount rates reflected management’s estimate of the time value of money and the risks specific to each unit that were
not already reflected in the cash flows. This was the benchmark used by management to assess operating performance
and to evaluate investment proposals. In determining appropriate rates for each unit, regard was given to the weighted
average cost of capital of the entity as a whole and adjusted for country and business risk specific to the unit.
Growth rate estimates were based on published industry research.
22. TRADE AND OTHER PAYABLES
Current
Trade payables and accruals
Employee related payables
Sundry creditors
GST payable
Total current payables
(a) Fair values
19,783
1,140
5,060
857
26,840
40,143
1,946
5,506
1,301
48,896
Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.
(b) Interest rate, foreign exchange and liquidity risk
Information regarding interest rate, foreign exchange and liquidity risk exposure is disclosed in note 31.
(c) Financial guarantees
VDM Group provides financial guarantees to its subsidiaries by way of a Deed of Cross Guarantee as disclosed in note
32(b).
67
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
23. INTEREST-BEARING LOANS AND OTHER BORROWINGS
Current
Interest bearing loan (9% fixed secured loan)
Non-interest bearing loans
Insurance premium funding
Hire purchase liabilities (note 33)
Total current interest-bearing loans and borrowings
Non-Current
Hire purchase liabilities (note 33)
Total non-current interest-bearing loans and
borrowings
(a) Fair values
Consolidated
2012
$’000
2013
$’000
1,018
-
442
322
1,782
299
299
-
72
2,055
341
2,468
128
128
The carrying amount of VDM Group’s current and non-current borrowings approximate their fair values.
(b) Interest rate, foreign exchange and liquidity risk
Information regarding interest rate, foreign exchange and liquidity risk exposure is disclosed in note 31.
(c) Assets pledged as security
Finance arrangements
Plant and equipment
Floating charge
All the remaining wholly owned assets
(d) Total financing facilities
Bank overdrafts
Bank guarantees
Contract performance bond
Total financing facilities available
1,114
869
56,739
153,395
450
7,000
25,000
32,450
450
22,000
25,000
47,450
The contract performance bond facility expires on 31 May 2014, subject to a 12 month annual renewal. The bank
guarantee and credit card facilities expire on 30 November 2013, subject to review. At 30 June 2013, $4,798,000 (2012:
$12,944,000) was drawn on the bank guarantee facility and $18,087,000 (2012: $15,585,000) was drawn on the contract
performance bond facility.
68
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
24. PROVISIONS
Current
Provision for employee entitlements
Provision for loss on sale of subsidiary (note 24(b)(i))
Provision for loss making contracts
Total current provision
Non-Current
Provision for employee entitlements
Total non-current provision
(a) Movements in provisions
Provision for loss on sale of subsidiary
At 1 July
(Utilised) / provided during the year
At 30 June
(b) Nature and timing of provisions
2013
$’000
Consolidated
2012
$’000
4,324
-
5,548
9,872
244
244
600
(600)
-
4,901
600
2,018
7,519
495
495
-
600
600
(i) Provision for loss on sale of subsidiary
As part of the sale agreement of Cape Crushing in 2012, the final consideration for the sale of shares was subject to
change pending a review / audit of the completion accounts. An adjustment amount was estimated at $600,000
payable to CFC Group Limited at 30 June 2012. As settlement of the final adjustment, an amount of $707,000 was
paid to CFC Group in 2013.
25. CONTRIBUTED EQUITY
(a) Ordinary shares
Issued and fully paid
Movement in ordinary shares on issue
Balance at 30 June 2012
Transaction costs on share and option issue
Reversal of tax benefits on capital raising costs in
prior years
Equity based payments (note 30(b))
Balance at 30 June 2013
(b) Treasury shares
248,554
248,612
933,873,071
Shares Value ($’000)
248,612
(51)
(268)
(7)
248,286
2012
No.
933,873,071
2013
No.
Treasury shares held in trust (note 30(c))
222,864
199,864
69
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
(c) Terms and conditions of contributed equity
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to
participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on
shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
(d) Capital Management
When managing capital, the Board's objective is to ensure the Company continues as a going concern as well as to
maintain optimal returns to shareholders and benefits for other stakeholders. The Board also aims to maintain a capital
structure that provides the lowest weighted average cost of capital available to the Company.
Following the significant restructuring activities during the year, the Company remains focussed on returning to profitability
in the short term and maintaining an appropriate amount of working capital. Upon realisation of the benefits of the
restructuring activities, the Directors shall reconsider the levels of after tax profits that the Company anticipates paying as
dividends.
The payment of dividends by the Company in the future will depend upon the availability of distributable earnings, the
Company’s franking credit position, operating results, available cash flow, financial condition, taxation position, future
capital requirements, as well as general business and financial conditions and any other factors the Directors may consider
relevant.
The Board considers net debt and total equity to be capital and monitors this through the gearing ratio. Given the low
capital expenditure intensity nature of the restructured business model, VDM Group is targeting to maintain a gearing ratio
of less than 15%. The gearing ratio based on continuing operations at 30 June 2013 and 2012 were as follows:
Interest bearing loans and other borrowings (note 23)
Less cash and cash equivalents (note 12 and 13)
Net (cash) / debt
Total equity
Total capital
Gearing ratio (net debt: total capital)
VDM Group is not subject to any externally imposed capital requirements.
26. RETAINED EARNINGS AND RESERVES
(a)
Movement in retained earnings
Balance at the beginning of the year
Net loss attributable to members of VDM Group Ltd
Balance at the end of the year
(b)
Movement in other capital reserve
Balance at the beginning of the year
Share based payment (note 30)
Balance at the end of the year
Consolidated
2012
$’000
2013
$’000
2,081
(17,095)
(15,014)
2,332
(12,682)
2,596
(23,597)
(21,001)
87,149
66,148
118%
(32%)
(162,430)
(84,408)
(246,838)
(107,618)
(54,812)
(162,430)
510
(83)
427
192
318
510
The other capital reserve is used to record the value of share based payment provided to employees, including KMP, as
part of their remuneration. Refer to note 30 for further details of these plans.
70
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
(c) Movement in equity reserve
Balance at the beginning of the year
Contingent consideration paid on prior acquisitions (note 24(b)(iii))
Stamp duty paid on prior acquisitions
Balance at the end of the year
Consolidated
2012
$’000
1,074
(149)
(468)
457
2013
$’000
457
-
-
457
The equity reserve is used to record differences between the carrying value of non-controlling interests and the
consideration paid/received, where there has been a transaction involving non-controlling interests that do not result in a
loss of control. The reserve is attributable to the equity of the parent.
In 2012, VDM Group incurred retrospective stamp duties of $468,000 in respect of its acquisition of the remaining 25%
interest in Cape Crushing on 1 January 2010.
27.
CASHFLOW STATEMENT INFORMATION
(a) Reconciliation of net profit after tax to the net cash flows from operations
Net loss after tax
Non-Cash Items:
Depreciation
Amortisation
Impairment of goodwill, assets, development costs and software
Allowance for doubtful debts
Net profit on disposal of property, plant and equipment
Assets written off
Share based payment (reversal) / expense
Settlement transaction costs from sale of subsidiary
Profit on sale of subsidiary
Loss recognised on remeasurement to fair value less costs to sell
Net profit on foreign exchange
Change in assets and liabilities:
Decrease / (increase) in trade and other receivables
Decrease in contracts in progress
Decrease in other assets
Increase in development properties
Increase in non-current assets held for sale
Decrease / (increase) in inventory
Decrease / (increase) in deferred tax assets
Decrease / (increase) in term deposits
Decrease / (increase) in trade and other creditors
Decrease in provisions
Increase in current tax receivable
Net cash flows used in operating activities
(b) Non-cash financing and investing activities
Purchase of property, plant and equipment on hire
purchase
Purchase of software on hire purchase
(84,408)
(54,812)
3,705
370
19,486
2,714
(3,383)
26
(90)
451
(879)
4,004
-
29,249
15,035
1,508
(95)
-
555
14,968
-
(18,551)
3,177
7
(12,151)
8,986
808
3,161
956
(1,916)
-
329
2,227
-
32,284
(58)
(14,078)
1,230
186
(226)
(2,465)
(96)
(6,679)
-
7,854
(1,964)
7,970
(16,303)
(734)
-
(3,143)
(25)
71
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
28. RELATED PARTY DISCLOSURE
(a) Subsidiaries
The consolidated financial statements include the financial statements of VDM Group Limited and the subsidiaries listed in
the following table:
Name
VDM Hyparspace Pty Ltd
Keytown Constructions Pty Ltd
VDM Investments Pty Ltd
VDM Developments Pty Ltd
VDM Engineering (Western Operations) Pty Ltd
(formerly VDM Consulting (WA) Pty Ltd)
VDM Consulting (NSW) Pty Ltd
VDM Consulting (VIC) Pty Ltd
VDM Engineering (Eastern Operations) Pty Ltd
(formerly VDM Consulting (QLD) Pty Ltd)
VDM Projects Pty Ltd
VDM Asset Management Pty Ltd
Skilful Holdings Pty Ltd
Burchill VDM Pty Ltd
VDM Construction (Western Operations) Pty Ltd
VDM Earthmoving Contractors Pty Ltd
VDM Group Ltd International (Dubai Branch)
Pty Ltd
Como Engineers Pty Ltd
VDM Contracting Pty Ltd
VDM Construction (Eastern Operations) Pty Ltd
(formerly VDM Construction (Australia) Pty Ltd)
Van Der Meer Consulting Vietnam Co Ltd
BCA Consultants Pty Ltd
The EB Trust
VDM Consulting Pty Ltd
VDM Equity Incentives Pty Ltd
VDM CCE Pty Ltd
Anagan Pty Ltd
Belleng VDM Pty Ltd
Burchill VDM (International) Pty Ltd
Riverside Structural Modelling Pty Ltd
Barlow Gregg VDM Pty Ltd
VDM Consulting (UAE) Pty Ltd
VDMAHP Pty Ltd*
Quartz South Hedland Pty Ltd
Quartz Trust
* - this company is dormant
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Vietnam
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
% equity interest
2012
100%
100%
100%
100%
2013
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
52%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
52%
100%
72
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
(b) Key management personnel
Details relating to KMP, including remuneration paid, are included in note 29.
(c) Ultimate parent
VDM Group Limited is the ultimate Australian parent entity.
(d) Transactions with related parties
There were no transactions that were entered into with related parties during 2013. For related party transactions in 2012
refer to 29(f).
For information regarding outstanding balances on related party trade receivables and payables at year end, refer to notes
28(e) below.
(e) Loans to related parties
As at 30 June 2013, $788,000 (2012: $788,000) was receivable from Track Procurement Services Pty Ltd (Track
Procurement). This loan receivable has been fully provided for. Track Procurement is an associate disclosed in note
28(f).
(f) Investment in associates
At 30 June 2013, VDM Group had the following interests in associates. The carrying value of investments in associates was
nil (2012: nil):
Structural Fabrications Pty Ltd
Track Procurement Services Pty Ltd
(g) Interest in jointly controlled entity
Consolidated
2012
2013
40%
50%
40%
50%
VDM Group has a 52% interest in Quartz South Hedland Pty Ltd, a jointly controlled entity involved in the development of a
property.
VDM Group’s share of the assets and liabilities as at 30 June 2013 and 2012 and income and expenses of the jointly
controlled entity for the years ended 30 June 2013 and 2012, which is proportionately consolidated in the financial
statements, are as follows:
Share of the joint venture’s statement of financial position
Current assets
Equity
Share of the joint venture’s revenue and profit
Impairment
Loss for the year from continuing operations
The joint venture has no contingent liabilities or capital commitments as at 30 June 2013 and 2012.
Consolidated
2012
$’000
2013
$’000
1,350
1,350
(98)
(98)
1,416
1,416
-
-
73
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
29. KEY MANAGEMENT PERSONNEL
(a) Compensation for key management personnel
Short Term
Post Employment
Share based payment
Termination benefits
Total compensation
(b) Shareholdings of key management personnel
2013
$’000
Consolidated
2012
$’000
2,457,631
155,123
(82,779)
35,649
2,565,624
3,046,473
235,771
330,862
257,965
3,871,071
Current directors
M Perrott
B Nazer
M Fry
Past directors
A Broad2
T Crossley1
Current executives
R Gregg
Past executives
J Kemp
Balance 1 July
2012
Granted as
remuneration
Options
exercised
Net change
other
Balance
30 June 2013
6,200,000
1,228,568
500,000
700,000
1,200,000
3,400,164
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,200,000
1,228,568
500,000
500,000
(1,200,000)
1,200,000
-
-
3,400,164
86,605
86,605
Total shareholding
Notes:
1. T Crossley’s balance reduced to nil during the year as he resigned as a Non- Executive Director of VDM Group on 24 October
13,228,732
(613,395)
-
-
12,615,337
2012.
2. A Broad was terminated as Managing Director with effect from 23 August 2013.
3. J Kemp was appointed on 7 November 2012 and resigned on 6 September 2013.
74
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
Current directors
M Perrott
B Nazer
T Crossley
M Fry
A Broad
Past directors
J van der Meer1
Current executives
R Gregg
Past executives
G Simpson2
Balance 1 July
2011
Granted as
remuneration
Options
exercised
Net change
other
Balance
30 June 2012
200,000
71,428
200,000
-
100,000
2,097,909
566,694
53,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,000,000
1,157,140
1,000,000
500,000
600,000
6,200,000
1,228,568
1,200,000
500,000
700,000
(2,097,909)
-
2,833,470
3,400,164
(53,000)
-
Total shareholding
Notes:
1. J van der Meer balance reduced to nil during the year as he resigned as an Executive Director of VDM Group on 24 November
9,939,701
3,289,031
-
-
13,228,732
2011 and subsequently did not meet the criteria of KMP .
2.G Simpson balance reduced to nil during the year as he resigned during the year.
(c) Option holdings of key management personnel
Current directors
M Perrott
B Nazer
M Fry
Past directors
A Broad2
T Crossley1
Current executives
R Gregg
Balance 1 July
2012
Granted as
remuneration
Options
exercised
Net change
other
Balance
30 June 2013
3,100,000
614,284
250,000
350,000
600,000
1,700,082
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,100,000
614,284
250,000
-
(600,000)
350,000
-
-
1,700,082
Total option holding
Notes:
1. T Crossley’s balance reduced to nil during the year as he resigned as a Non- Executive Director of VDM Group on 24 October
6,614,366
(600,000)
-
-
6,014,366
2012.
2. A Broad was terminated as Managing Director with effect from 23 August 2013.
Balance 1 July
2011
Granted as
remuneration
Options
exercised
Net change
other
Balance
30 June 2012
Current directors
M Perrott
B Nazer
T Crossley
M Fry
A Broad
Current executives
R Gregg
Total option holding
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,100,000
614,284
600,000
250,000
350,000
3,100,000
614,284
600,000
250,000
350,000
1,700,082
1,700,082
6,614,366
6,614,366
75
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
(d) Performance rights holdings of key management personnel
Balance 1 July
2012
Granted as
remuneration
Rights
exercised
Net change
other
Balance
30 June 2013
Past directors
A Broad1
Current executives
R Gregg
Past executives
R Gonzales3
T Fallon2
D Coyne4
11,956,522
5,869,565
5,869,565
6,782,609
3,913,043
-
-
-
-
-
-
-
-
-
-
-
-
11,956,522
5,869,565
(5,869,565)
(6,782,609)
(3,913,043)
-
-
-
17,826,087
Total option holding
Notes:
1. Performance rights granted to A Broad were approved at the 2012 Annual General Meeting. A Broad was terminated as
(16,565,217)
34,391,304
-
-
Managing Director with effect from 23 August 2013.
2. T Fallon resigned with effect from 27 November 2012 and his performance rights lapsed upon his date of termination.
3. R Gonzales was terminated with effect from 25 January 2013 and his performance rights lapsed upon his date of termination.
4. D Coyne resigned with effect from 12 June 2013 and his performance rights lapsed upon his date of termination.
Current directors
A Broad1
Current executives
R Gonzales
R Gregg
T Fallon2
D Coyne
Balance 1 July
2011
Granted as
remuneration
Rights
exercised
Net change
other
Balance
30 June 2012
-
-
-
-
-
11,956,522
5,869,565
5,869,565
6,782,609
3,913,043
-
-
-
-
-
-
-
-
-
-
11,956,522
5,869,565
5,869,565
6,782,609
3,913,043
-
Total option holding
1. Performance rights granted to A Broad are subject to shareholder approval at the 2012 Annual General Meeting.
2. T Fallon has resigned with effect from 27 November 2012 and his performance rights will lapse upon his date of termination.
34,391,304
-
-
34,391,304
All equity transactions with KMP other than those arising from the exercise of remuneration options have been
entered into under terms and conditions no more favourable than those VDM Group would have adopted if dealing at
arm’s length.
(e) Loans to key management personnel
There were no loans granted to KMP during the year ended 30 June 2013 and 2012.
(f) Other transactions and balances with key management personnel and their related entities
VDM Group had had no transactions with key management personnel and their related entities during 30 June 2013.
In 2012, VDM Group rented an office building from O Corp Pty Ltd, a company related to J van der Meer, on normal
commercial terms and conditions. The amount recognised as an expense during the year in relation to these transactions
was $242,000. The amount payable to O Corp Pty Ltd at the end of the financial year was $nil (2012: $nil).
76
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
30.
SHARE-BASED PAYMENT PLANS
(a) Recognised share based payment expense
(Reversal) / expense arising from equity-settled share-
based payment transactions
Total share-based payment (reversal) / expense
(b) Types of share-based payment plans
Consolidated
2012
$’000
2013
$’000
(90)
(90)
329
329
VDM Group Performance Rights Plan
The initial public offer included a 300,000 share allocation for the VDM Group’s Performance Rights Plan. In order to
retain key personnel, selected key employees were allocated an amount of shares ranging from 5,000 to 25,000. These
shares vested over a period of up to 24 months, with vesting criteria based on continuity of service. During the year the
amount vesting and a corresponding expense of $nil (2012: $nil) was recognised in relation to the Plan. 150,005 shares
are not yet allocated and are held in trust.
The initial acquisition of Como Engineers included an allocation of 265,865 shares for the VDM Group’s Performance
Rights Plan. In line with the sale of Como during the year, a reversal of $7,000 (2012: $11,000 reversal) was recognised in
relation to the Plan. 26,765 shares are held in trust.
VDM Group Employee Incentive Plan
VDM Group bought 119,876 shares for the Employee Incentive Plan which was set up in February 2008 and included the
allocation of 119,876 shares to retain employees. Selected employees were allocated an amount of shares ranging from
500 to 750. These shares vested over a period of up to 24 months, with vesting criteria based on continuity of service.
During the year the amount vesting and a corresponding expense of $nil (2012: $nil) was recognised in relation to the
Plan. 46,094 shares are not yet allocated and are held in trust.
Employee Option Plan (EOP)
On 31 January 2008 VDM Group offered employees the right to participate in a share option scheme. The offer closed on 11
February 2008. 1,710,000 options were taken up at an exercise price of $2.25. 25% of the options vested on 21 December
2008, 25% of the options vested on 21 December 2009, 25% of the options vest on 21 December 2010 and the remaining 25%
of the options vest on 21 December 2011. During the year an expense of $nil (2012: $13,000 reversal) was recognised in
relation to the EOP. 90,625 options lapsed or were cancelled during the year (2012: 180,625).
Executive Performance Rights Plan (EPRP)
On 1 December 2011, 34,391,304 performance rights were granted to senior executives. A performance right is an entitlement
to acquire a fully paid ordinary share in the capital of VDM Group at a future date for no consideration should all relevant vesting
conditions be met. Performance rights vest over a period of 3 years where the Total Shareholder Return (TSR) that VDM
Group delivers to its shareholders exceeds the average Total Shareholder Return of the S&P ASX 200 Industrial Group in the
same corresponding period, provided that VDM Group has been profitable during that same period and the senior executive is
employed on such date. Refer to the remuneration report for further details of the Executive Performance Rights Plan.
The fair value of the performance right is estimated at the grant date using a Monte-Carlo simulation model for the market
based vesting conditions and a binomial pricing model for the non-market based vesting conditions, taking into account the
terms and conditions upon which the performance rights were granted.
During the year a reversal of $83,000 (2012: $331,000 expense) was recognised in relation to the Plan.
(c) Reconciliation of treasury shares
VDM Group Performance Rights Plan
VDM Group Performance Rights Plan – Como Engineers
VDM Group Employee Incentive Plan
Total treasury shares (note 25)
At 1 July
Performance Rights cancelled and released from escrow
At 30 June
2013
No.
150,005
26,765
46,094
222,864
199,864
23,000
222,864
2012
No.
150,005
3,765
46,094
199,864
199,864
-
199,864
77
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
(d) Summaries of options granted under the Employee Option Plan (EOP)
The following table illustrates the number (No.) and weighted average exercise price (WAEP) of, and movements in, share
options during the year:
Outstanding at the beginning of the year
Forfeited during the year
Outstanding at the end of the year
2013
No.
90,625
(90,625)
-
2013
WAEP
2.25
2.25
-
2012
No.
271,250
(180,625)
90,625
2012
WAEP
2.25
2.25
2.25
The weighted average remaining contractual life for the share options outstanding as at 30 June 2013 is nil years (2012: nil
years).
There were no options granted during the year ended 30 June 2013 and 2012.
(e) Summaries of performance rights granted under the Executive Performance Rights Plan (EPRP)
The following table illustrates the number (No.) and weighted average exercise price (WAEP) of, and movements in,
performance rights during the year:
Outstanding at the beginning of the year
Revalued during the year
Forfeited during the year
Granted during the year
Outstanding at the end of the year
2013
No.
34,391,304
-
(16,565,217)
-
17,826,087
2013
WAEP
0.0398
(0.0278)
(0.0398)
-
0.0212
2012
No.
-
-
-
34,391,304
34,391,304
2012
WAEP
-
-
-
0.0398
0.0398
The weighted average remaining contractual life for the share options outstanding as at 30 June 2013 is 0.92 years (2012:
1.92 years).
The following table lists the inputs to the model used for the EPRP for the year ended 30 June 2013 and 2012:
Expected volatility %
Risk-free interest rate %
Underlying security spot price $
Expected life of the performance rights (years)
Model used for market based vesting conditions
Model used for non-market based vesting conditions
Value per performance right $
2012
EPRP
70
2.39
0.058
2 to 3
Monte-Carlo
Binomial
0.0398
The expected volatility reflects the assumption that the historical volatility from 27 October 2011 (since the trading halt) to
the valuation date of 18 May 2012 is indicative of future trends, which may also not necessarily be the actual outcome.
The performance rights granted to Mr Broad of 11,956,522 in 2012 were approved at the Annual General Meeting on 29
November 2012. The performance rights granted to Mr Broad were revalued at $0.012 per right based on the underlying
share price at that time. Following the termination of A Broad on 23 August 2013, these performance rights have lapsed
subsequent to the balance date.
There were no performance rights granted in 2013.
78
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
31. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Credit, liquidity and market risk (including interest rate and foreign exchange risk) arise in the normal course of the VDM
Group’s business. VDM Group manages its exposure to these key financial risks in accordance with VDM Group's
financial risk management policy. The objective of the policy is to support the delivery of VDM Group's financial targets
whilst protecting future financial security. VDM Group's principal financial instruments comprise receivables, payables,
bank loans and overdrafts, hire purchase liabilities, cash and short-term deposits.
VDM Group uses different methods to measure and manage different types of risks to which it is exposed. These include
monitoring levels of exposure to interest rate and foreign exchange risk and assessments of market forecasts for interest
rate and foreign exchange. Ageing analysis and monitoring of specific credit allowances are undertaken to manage credit
risk, liquidity risk is monitored through the development of future rolling cash flow forecasts.
Primary responsibility for identification and control of financial risks rests with the Audit and Risk Committee under the
authority of the Board. The Board reviews and agrees policies for managing each of the risks identified below.
Risk exposures and responses
(a) Market risk
Interest rate risk
Interest rate risk is the risk that VDM Group’s financial position will be adversely affected by movements in interest rates
that will increase the cost of floating rate debt or opportunity losses that may arise on fixed rate borrowings in a falling
interest rate environment. Interest rate risk on cash and short term deposits is not a material risk due to the short term
nature of these financial instruments.
VDM Group has reduced its exposure to interest rate risk during 2012 as a result of settling its interest bearing debt from
the proceeds arising from the sale of Cape Crushing.
The financial instruments exposed to variable interest rate risk are as follows:
Financial assets
Cash and cash equivalents (note 12)
Term deposits (note 13)
Financial liabilities
Interest bearing borrowings and loans (note 23)
Consolidated
2012
$’000
2013
$’000
11,857
5,238
10,029
13,568
-
-
The following table summarises the sensitivity on the interest rate exposures, (excluding opportunity cost of fixed rate
borrowings) in existence at the balance sheet date. The sensitivity is based on foreseeable changes over a financial year.
Post-tax gain/ (loss)
+ 2% (200 basis points)
– 1% (100 basis points)
Impact on profit
239
(120)
330
(165)
The movement in profit is due to lower / higher interest cost from variable rate debt and cash balances.
Other than retained earnings, there is no impact on equity in the consolidated entity.
79
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
Foreign currency risk
VDM Group has reduced its foreign currency risk exposure during 2013 with the sale of its wholly owned subsidiary, Como
and the wind up of VDM Group’s international operations in Indonesia. In 2012, VDM Group was exposed to foreign
exchange risk arising from various currency exposures, primarily with respect to the US Dollar, Indonesian Rupiah,
Canadian Dollar and United Arab Emirates Dirham.
Foreign currency risk arises from transactions, assets and liabilities that are denominated in a currency that is not the
functional currency of the transacting entity. Measuring the exposure to foreign currency risk is achieved by regularly
monitoring and performing sensitivity analysis on VDM Group’s financial position. Currently there is no foreign exchange
hedge programme in place.
At balance date, VDM Group had the following exposure on their foreign financial instruments:
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Financial liabilities
Trade and other payables
Total financial liabilities
Consolidated
2012
$’000
2013
$’000
-
-
-
-
-
494
598
1,092
3
3
The following table summarises the sensitivity of financial instruments held at balance sheet date to movements in the
exchange rate of the Australian dollar to the US Dollar. The sensitivity is based on foreseeable changes over a financial
year.
Post-tax gain/ (loss)
AUD/ USD +10%
AUD/ USD -10%
Impact on profit
-
-
76
(76)
Other than retained earnings, there is no impact on equity in the consolidated entity.
(b) Credit risk
Credit risk arises from the financial assets of VDM Group, which comprises cash and cash equivalents and trade and other
receivables. VDM Group’s exposure to credit risk arises from potential default of the counter party, with a maximum
exposure equal to the carrying amount of these instruments.
VDM Group manages its credit risk by trading only with recognised, creditworthy third parties, and as such collateral is not
requested nor is it VDM Group's policy to securitise its trade and other receivables. Customers are subject to credit
verification procedures including an assessment of their independent credit rating, financial position, past experience and
industry reputation. Receivables balances are monitored on an ongoing basis. At balance sheet date there were no
significant concentrations of credit risk within VDM Group and financial instruments are held amongst reputable Australian
financial institutions thus minimising the risk of default of counterparties.
The maximum exposure to credit risk at the reporting date was as follows:
Current
Cash and cash equivalents (note 12)
Term deposits (note 13)
Trade and other receivables (note 14)
11,857
5,238
12,507
29,602
10,029
13,568
48,736
72,333
80
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
(c) Liquidity risk
Liquidity risk is the risk that the entity will encounter difficulty in meeting its commitments concerning its financial liabilities.
As a result, the liquidity position of VDM Group is managed to ensure sufficient liquid funds are available to meet our
financial commitments in a timely and cost-effective manner.
VDM Group continually reviews its liquidity position including cash flow forecasts to determine the forecast liquidity position
and maintain appropriate liquidity levels. Following the retirement of all outstanding bank debt during the year ended 30
June 2012, the objective of VDM Group is to have sufficient liquid assets to meet short term commitments, and to fund
capital expenditure through a mixture of hire purchase and cash.
The table below reflects all contractually fixed payments for settlement, repayments and interest resulting from recognised
financial assets and liabilities and does not recognise any cash for unresolved claims against our projects which have not
been recognised as income. The obligations presented are the undiscounted cash flows for the respective upcoming fiscal
years. Cash flows for financial assets and liabilities without fixed amount or timing are based on the conditions existing at
30 June 2013. Repayment obligations in respect of the bank loans, hire purchase facilities and trade and other payables
are as follows:
No later than one year
Later than one year but not later than two years
Later than two years but not later than three years
2013
$’000
28,709
253
63
29,024
Consolidated
2012
$’000
53,467
132
-
53,599
The following table reflects a maturity analysis of financial assets and liabilities based on management’s expectation of
settlement.
Year ended 30 June 2013
Consolidated
Financial assets
Cash and cash equivalents (note 12)
Term deposits (note 13)
Other receivables (note 14)
Trade receivables (note 14)
Financial liabilities
Trade and other payables
Other payables
Hire purchase liabilities (note 33)
Interest bearing loans and borrowings
Net maturity
Year ended 30 June 2012
Consolidated
Financial assets
Cash and cash equivalents (note 12)
Term deposits (note 13)
Other receivables (note 14)
Trade receivables (note 14)
Financial liabilities
Trade and other payables
Other payables
Hire purchase liabilities (note 33)
Interest bearing loans and borrowings
Net maturity
Total
0-60 days
$’000
$’000
61 days - 1
year
$’000
1-5 years
>5 years
$’000
$’000
11,857
5,238
2,730
9,777
29,602
12,289
14,551
676
1,508
29,024
578
11,857
-
2,730
8,380
22,967
11,577
14,551
43
786
26,957
(3,990)
-
5,238
-
1,397
6,635
712
-
317
722
1,751
4,884
-
-
-
-
-
-
-
316
-
316
(316)
-
-
-
-
-
-
-
-
-
-
-
Total
0-60 days
$’000
$’000
61 days - 1
year
$’000
1-5 years
>5 years
$’000
$’000
10,029
13,568
9,241
39,495
72,333
28,023
22,891
500
2,185
53,599
18,734
10,029
13,568
9,241
34,961
67,799
26,150
22,891
94
706
49,841
17,958
-
-
4,534
4,534
1,873
-
274
1,479
3,626
908
-
-
-
-
-
-
-
132
-
132
(132)
-
-
-
-
-
-
-
-
-
-
-
81
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
(d) Fair value
The fair value of financial assets and financial liabilities approximate the carrying value due to the liquid nature of these
assets and / or the short term nature of these financial rights and obligations. Due to the liquid nature of these assets / or
short term nature of these financial rights and obligations, no valuation techniques, methods or assumptions have been
applied to determine fair value. There are no unrecognised financial assets or financial liabilities at year-end.
32. PARENT ENTITY INFORMATION
Information relating to VDM Group Ltd:
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Accumulated losses
Option reserve
Total shareholders’ equity
Loss of the parent entity
Total comprehensive loss of the parent entity
(a) Bank guarantees:
Parent entity
2012
$’000
2013
$’000
26,750
12,946
15,627
10,614
248,287
(246,838)
883
2,332
(93,298)
(93,298)
32,750
111,504
24,349
24,355
248,612
(162,430)
967
87,149
(70,294)
(70,294)
As at 30 June 2013 VDM Group Ltd had $260,000 (2012: $390,000) held in bank guarantees with BankWest, relating
to bonds on leased property.
(b) Guarantees in relation to debts of subsidiaries:
Pursuant to class order 98/1418 VDM Group Ltd and the Closed Group have entered into a Deed of Cross Guarantee
on 1 February 2010. The effect of the deed is that VDM Group Ltd has guaranteed to pay any deficiency in the event
of winding up of controlled entities or if they do not meet their obligations under the terms of overdrafts, loans, leases
or other liabilities subject to the guarantee.
(c) Contingent liabilities
Refer to note 34(a) for legal claims against the parent entity.
(d) Property, plant and equipment commitments
VDM Group had no capital commitments at 30 June 2013 and 2012.
82
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
33. COMMITMENTS
(a) Operating leases
Future minimum rentals payable under non-cancellable operating leases as follows:
Within one year
One year or later but not later than five years
After more than five years
Total minimum lease payments
Consolidated
2012
$’000
2013
$’000
2,338
5,335
-
7,673
2,579
7,449
7,620
17,648
During the year VDM Group made operating lease payments totalling $2,261,000 (2012: $3,580,000).
VDM Group entered into a 10 year commercial property lease with the right to renew for a further 5 years
commencing in October 2012. The lease was subsequently terminated under mutual agreement.
Other operating leases entered into on various commercial properties have an average life of between 2 and 5 years
and generally provide VDM Group with a right of renewal, at which time, all terms are renegotiated. Lease payments
comprise a base amount plus an incremental contingent rental. Contingent rentals are generally based on
movements in the Consumer Price Index and do not include the renewal period. There are no restrictions placed
upon VDM Group from entering into the leases.
(b) Hire purchase commitments
Not later than one year
After one year but not more than five years
Total minimum hire purchase payments
Future finance charges
Present value of minimum lease payments (note 23)
Total hire purchase liability
Included in the financial statements as:
Current – Hire purchase liabilities
Non – Current Hire purchase liabilities
Total included in interest bearing liabilities (note 23)
360
316
676
(55)
621
322
299
621
368
132
500
(31)
469
341
128
469
VDM Group has acquired plant and equipment under hire purchase agreements expiring from 1 to 5 years.
(c) Property, plant and equipment commitments
VDM Group has capital commitments at 30 June 2013 amounting to $115,000 (2012: $132,000)
(d) Remuneration commitments
VDM Group did not have any remuneration commitments at 30 June 2013 (2012: $nil) other than as disclosed in the
remuneration report.
83
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
34. CONTINGENCIES
(a) Legal claim
VDM Group is involved in the provision of engineering and construction services. The nature of these services is such that
claims arise from time to time for and against VDM Group. A number of claims and counter-claims exist at 30 June 2013,
the majority of which would not lead VDM Group to incur material losses. Two claims and counter-claims exist as at 30
June 2013 that may lead to VDM Group incurring material losses if claims made by counterparties are successful for the
full amount of the values claimed.
Gendredge Pty Ltd
VDM Group engaged Gendredge Pty Ltd (“Gendredge”) as a subcontractor on a project in Western Australia. Gendredge
has commenced proceedings in the courts of Western Australia for amounts it claims is owed by VDM Group to
Gendredge. VDM Group has made a counter-claim against Gendredge for repudiation of the contract and additional costs
incurred to engage an alternate subcontractor to complete the work not completed by Gendredge.
In October 2011, VDM Group applied to the courts of Western Australia for an order that Gendredge post initial security for
the costs that VDM Group may incur in defending the claims made by Gendredge. On 22 December 2011, the Supreme
Court of Western Australia ordered Gendredge to provide security to the court of $50,000 to cover expected costs of VDM
Group until the commencement of trial.
Statement of claims by both parties has been submitted to the court. No significant activity has occurred since both parties
submitted their information to the WA Supreme Court in late calendar year 2012; however, in the event that Gendredge is
successful in the courts of Western Australia, VDM Group may incur a material loss. VDM Group has not disclosed the
value of the claims as it may be prejudicial to the successful outcome thereof.
Wandoo Project – OTOC Claim
OTOC were a subcontractor to VDM Group on the Wandoo Housing Refurbishment project. The project entailed the
refurbishment of 240 houses and town facilities for Rio Tinto in the township of Wandoo over a 3 year period.
Following completion of the work in November 2012, OTOC alleges that certain activities that they carried out on site were
not part of their original subcontract price and the work was in fact variations to their subcontract.
VDM Group has rejected the claims made by OTOC. Legal proceedings have not been commenced by OTOC, however,
they have intimated to VDM Group that they are considering litigation.
Jimblebar AN Project – Central Systems Claim
Central Systems were a subcontractor to VDM Group on this project. Due to performance and productivity performance
issues by Central Systems on the project, their scope was reduced by VDM Group.
Central Systems have submitted claims to VDM Group for extensions of time (and resulting cost) and scope changes.
Currently VDM Group are working through Non-Conformance Reports (NDR’s) that have been issued to establish time and
/ or cost impacts to determine a counterclaim.
VDM Group has not disclosed the value of the claims as it may be prejudicial to the successful outcome thereof.
(b) Bank guarantees and insurance bonds:
As at 30 June 2013 VDM Group had bank guarantees with BankWest of $4,798,000 (2012: $12,944,000) given to various
clients for satisfactory contract performance.
As at 30 June 2013 VDM Group had insurance bonds with Assetinsure Pty Ltd of $18,087,000 (2012: $15,585,000) given
to various clients for satisfactory contract performance.
(c) Contingencies relating to VDM Group’s interest in joint ventures
There are no contingencies at 30 June 2013 relating to VDM Group’s interest in joint ventures.
84
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
35. SIGNIFICANT EVENTS AFTER THE BALANCE DATE
On 29 May 2013, VDM Group announced that it had entered into a binding share subscription agreement under which
H&H agreed to subscribe for 600,000,000 new fully paid ordinary shares at 2.5 cents per share to raise $15,000,000.
On 27 August 2013, VDM Group announced that the company was in dispute with a major customer in regard to the status
of a material contract. VDM Group received a notice from the customer purporting to exercise its right to take the whole of
the remaining works under the contract out of the hands of VDM Group (Customer Notice). The effect of this notice may
materially impact the operating performance and short term future cash flows of VDM Group.
Following receipt of the Customer Notice, VDM Group was notified by H&H that it considered the matter to be a material
adverse change within the definition of the existing share subscription agreement. As a result, an alternative capital raising
was agreed with H&H on 27 August 2013 to provide capital of $6,401,000 immediately, via a Placement of 140,080,961
shares at 1.0 cent per share to raise $1,401,000 and a Convertible Loan of $5,000,000 issued to H&H with a conversion
price of 1.0 cent per share (conversion subject to shareholder approval) at the forthcoming AGM.
Following the issue of the conversion shares to H&H, H&H will have the right to appoint a further nominee Director, to the
Board, which the Company understands will be Mr Ming Guo. Also, Barry Nazer and Richard Mickle will resign as directors
of the Board at the conclusion of the AGM. In addition, it is intended that Dr Hua will become Executive Chairman, and
Michael Perrott will become Deputy Non-executive Chairman at the conclusion of the AGM.
In conjunction with the placement, Dr Hua, the owner of H&H, and Mr Ru have been appointed Directors of VDM Group
effective 28 August 2013. Dr Hua was also appointed Managing Director of VDM Group effective from 9 September 2013.
As announced on 23 August 2013, Mr Broad was terminated as Managing Director and Chief Executive Officer.
On 9 August 2013, VDM Group received $1,350,000 to enable the discharge of its mortgage and sale of its shares in
Quartz South Hedland Pty Ltd.
VDM Group announced on 20 September 2013 that it had entered into a non-binding sale agreement with an outside party
to sell all the issued share capital of VDM Construction (Eastern Operations) Pty Ltd for $2,750,000. A binding share sale
agreement was executed on 7 October 2013.
VDM Group is actively pursuing options to divest parts of the consulting business via management buy-outs. As at signing
of the accounts, no agreement had been signed.
VDM Group also entered into an unsecured loan facility of up to $4,000,000to be provided by H&H to VDM Group (New
Facility). Subject to shareholder approval at the forthcoming AGM, VDM Group will grant a general security to H&H in
respect of the New Facility.
In addition, on 29 October 2013, VDM Group announced it is proposing to make a pro-rata entitlement offer to its
Shareholders to subscribe for Shares at a price of $0.01 per Share seeking to raise at least $9,250,000 (Rights Issue).
Pursuant to the Rights Issue, H&H has agreed to apply for $4,000,000 of shares through subscribing for some or all of its
entitlement and, if required, by underwriting the Rights Issue, conditional upon Hunter Hall Investment Management
Limited contributing an aggregate of $1,000,000 under the Rights Issue. The Rights Issue will have a minimum
subscription of $5,000,000.To the extent that H&H is required to contribute pursuant to its pro-rata entitlement and
underwriting obligations under the Rights Issue, any funds that VDM has drawn down pursuant to the New Facility will be
set off against H&H's subscription and underwriting commitments pursuant to the Rights Issue in repayment of that part of
the New Facility. Further details of the Rights Issue will be provided to shareholders in due course.
36. AUDITORS’ REMUNERATION
Amount received or receivable by Ernst & Young for:
An audit or review of the financial statements
Other audit or review procedures
Non audit fees – tax compliance
Total auditors’ remuneration
Consolidated
2012
2013
$
$
293,550
8,498
145,279
447,327
407,755
93,264
89,851
590,870
85
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
37. CLOSED GROUP CLASS ORDER DISCLOSURES
(a) Closed group class order disclosures
The consolidated financial statements include the financial statements of VDM Group and the subsidiaries listed in the
following table:
Name
VDM Hyparspace Pty Ltd
Keytown Constructions Pty Ltd
VDM Investments Pty Ltd
VDM Developments Pty Ltd
VDM Engineering (Western Operations) Pty Ltd
(formerly VDM Consulting (WA) Pty Ltd)
VDM Consulting (NSW) Pty Ltd
VDM Consulting (VIC) Pty Ltd
VDM Engineering (Eastern Operations) Pty Ltd
(formerly VDM Consulting (QLD) Pty Ltd)
VDM Projects Pty Ltd
VDM Asset Management Pty Ltd
Skilful Holdings Pty Ltd
Burchill VDM Pty Ltd
VDM Construction (Western Operations) Pty Ltd
VDM Earthmoving Contractors Pty Ltd
VDM Group Ltd International (Dubai Branch)
Pty Ltd
Como Engineers Pty Ltd
VDM Contracting Pty Ltd
VDM Construction (Eastern Operations) Pty Ltd
(formerly VDM Construction (Australia) Pty Ltd)
Van Der Meer Consulting Vietnam Co Ltd
BCA Consultants Pty Ltd
The EB Trust
VDM Consulting Pty Ltd
VDM Equity Incentives Pty Ltd
VDM CCE Pty Ltd
Anagan Pty Ltd
Belleng VDM Pty Ltd
Burchill VDM (International) Pty Ltd
Riverside Structural Modelling Pty Ltd
Barlow Gregg VDM Pty Ltd
VDM Consulting (UAE) Pty Ltd
VDMAHP Pty Ltd*
Quartz South Hedland Pty Ltd
Quartz Trust
* - this company is dormant
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Vietnam
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
% equity interest
2012
100%
100%
100%
100%
2013
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
52%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
52%
100%
86
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
(b) Entities subject to class order relief
Pursuant to Class Order 98/1418, relief has been granted to VDM Construction Pty Ltd (formerly called Wylie & Skene Pty
Ltd), Bellero Constructions (QLD) Pty Ltd, VDM Contracting Pty Ltd (formerly called Kayano Nominees Pty Ltd), VDM
Earthmoving Contractors Pty Ltd and Cape Crushing and Earthmoving Contractors Pty Ltd from the Corporations Act 2001
requirements for the preparation, audit and lodgement of their financial reports.
As a condition of the Class Order, VDM Group Ltd, VDM Consulting (WA) Pty Ltd, VDM Consulting (QLD) Pty Ltd, Barlow
Gregg VDM Pty Ltd, VDM Consulting (NSW) Pty Ltd, VDM Consulting (VIC) Pty Ltd, Riverside Structural Modelling Pty
Ltd, VDM Projects Pty Ltd, Skilful Holdings Pty Ltd, VDM Group Ltd International (Dubai Branch) Pty Ltd, VDM Asset
Management Pty Ltd, Burchill VDM Pty Ltd, Belleng VDM Pty Ltd, Burchill VDM (International) Pty Ltd, VDM Consulting
Pty Ltd, BCA Consultants Pty Ltd, Agenda Lab Pty Ltd, Keytown Constructions Pty Ltd, Anagan Pty Ltd, VDM Investments
Pty Ltd, VDM CCE Pty Ltd (formerly called Civmec Construction and Engineering Pty Ltd), VDM Construction Pty Ltd
(foremerly called Wylie & Skene Pty Ltd), VDM Developments Pty Ltd, ACN 087 442 877 Pty Ltd (formerly called VDM
Constructions Pty Ltd), Bellero Constructions (QLD) Pty Ltd, VDM Earthmoving Contractors Pty Ltd, Como Engineers Pty
Ltd, VDM Contracting Pty Ltd (formerly called Kayano Nominees Pty Ltd), VDM Resources and Infrastructure Pty Ltd,
VDM Equity Incentives Pty Ltd and Cape Crushing and Earthmoving Contractors Pty Ltd, (the “Closed Group”), entered
into a Deed of Cross Guarantee on 1 February 2010. The effect of the deed is that VDM Group Ltd has guaranteed to pay
any deficiency in the event of winding up of controlled entities or if they do not meet their obligations under the terms of
overdrafts, loans, leases or other liabilities subject to the guarantee. The controlled entities have also given a similar
guarantee in the event that VDM Group Ltd is wound up or if it does not meet its obligations under the terms of overdrafts,
loans, leases or other liabilities subject to the guarantee.
(c) Statement of comprehensive income
The consolidated income statement and balance sheet of the entities that are members of the Closed Group are as
follows:
Loss from continuing operations before income tax
Income tax benefit
Loss after tax from continuing operations
(Loss) / profit from discontinued operation
Net loss for the year
Non-controlling interest
Dividends paid
Accumulated losses at the beginning of the year
Accumulated losses at the end of the year
Closed Group
2012
$’000
2013
$’000
(66,707)
(14,897)
(81,604)
(2,749)
(84,353)
(28,647)
2,618
(26,029)
(27,792)
(53,821)
(160,560)
(244,913)
(106,739)
(160,560)
87
VDM GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2013
(d) Statement of financial position
ASSETS
Current assets
Cash and cash equivalents
Term deposit
Trade and other receivables
Contracts in progress
Inventory
Income tax receivable
Development properties
Other assets
Non-current assets classified as held for sale
Total current assets
Non-current assets
Trade and other receivables
Investments
Property, plant and equipment
Deferred tax assets
Intangible assets and goodwill
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Amount due to customers for contract work
Interest-bearing loans and borrowings
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Interest-bearing loans and other borrowings
Provisions
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
Closed Group
2012
$’000
2013
$’000
11,853
5,238
19,598
7,848
308
-
675
728
46,248
900
47,148
257
665
6,359
-
307
7,588
54,736
27,110
7,200
1,782
3,974
9,872
49,938
299
243
542
50,480
4,256
9,858
13,568
54,860
19,656
936
-
789
2,305
101,972
1,295
103,267
-
1,444
12,817
15,183
23,023
52,467
155,734
49,002
3,488
2,396
3,687
7,519
66,092
128
495
623
66,715
89,019
248,286
883
(244,913)
4,256
248,612
967
(160,560)
89,019
88
VDM GROUP LIMITED
DIRECTORS’ DECLARATION
For the year ended 30 June 2013
In accordance with a resolution of the directors of VDM Group Limited, I state that:
In the opinion of the directors:
(a)
the financial statements and notes of the consolidated entity are in accordance with the Corporations Act
2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001;
(b)
(c)
(d)
(e)
the financial statements and notes also comply with International Financial Reporting Standards as disclosed
in note 2;
Subject to the satisfactory achievement of the matters described in note 2, there are reasonable grounds to
believe that the consolidated entity will be able to pay its debts as and when they become due and payable;
this declaration has been made after receiving the declarations required to be made to the Directors in
accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2013; and
as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed
Group identified in Note 37 will be able to meet any obligations or liabilities to which they are or may become
subject, by virtue of the Deed of Cross Guarantee.
On behalf of the Board
Dr Hua
Managing Director
Perth, Western Australia
29 October 2013
89
VDM GROUP LIMITED
INDEPENDENT AUDIT REPORT
For the year ended 30 June 2012
90
VDM GROUP LIMITED
INDEPENDENT AUDIT REPORT
For the year ended 30 June 2012
91
VDM GROUP LIMITED
ASX ADDITIONAL INFORMATION
For the year ended 30 June 2013
SHAREHOLDER INFORMATION
Additional information required by ASX Listing Rules and not shown elsewhere in the report is set out below. The
information is current as of 13 September 2013.
TWENTY LARGEST SHAREHOLDERS
Shareholder
H&H Holdings Australia Pty Ltd
J P Morgan Nominees Australia Limited
HSBC Custody Nominees
Wavet Fund No 2 Pty Ltd
UBS Nominees Pty Ltd
James Howard Nigel Smalley
Mr John Finlay Mackenzie Rowley
PPK Investments Holdings Pty Ltd
Mr Brian Hon Leung Lee
Merrill Lynch (Australia) Nominees Pty Limited
Washington H Soul Pattinson and Company Limited
Duncraig Investment Services Pty Ltd
Mr Aaron Francis Quirk
NJP Nominees Pty Ltd
Mr Anthony Grant Melville + Mrs Elaine Sandra
Melville
Mr Peter James Banovich
Mr David Marshall Nesbitt
Cootingal Pty Ltd
David Kendall Smalley
Mr Robert Mark Windsor
Total
SHARES IN VOLUNTARY ESCROW
There are no shares in voluntary escrow.
SUBSTANTIAL SHAREHOLDINGS
Number of ordinary
fully paid shares held
185,110,976
139,265,273
29,415,519
27,500,000
26,824,232
25,000,000
12,000,000
11,500,000
9,000,000
8,155,660
7,000,000
6,200,000
6,058,250
5,142,852
5,000,000
4,894,615
4,800,000
4,786,909
4,660,000
4,532,778
526,847,064
% held of capital
17.24
12.96
2.74
2.55
2.50
2.33
1.12
1.07
0.84
0.76
0.65
0.58
0.56
0.48
0.47
0.46
0.45
0.45
0.43
0.42
49.06
The following shareholders have declared a relevant interest in the number of voting shares at the date of giving
notice under Part 6C.1 of the Corporations Act.
Shareholder
H & H Holdings Australia Pty Ltd
Number of ordinary
fully paid shares held
185,110,976
% held of capital
17.24
92
VDM GROUP LIMITED
ASX ADDITIONAL INFORMATION
For the year ended 30 June 2013
DISTRIBUTION OF SHAREHOLDINGS
Range of holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and above
Total
Number of shareholders
631
887
497
1,604
927
4,541
Number of ordinary
shares
245,470
2,520,894
3,862,458
66,713,934
1,000,611,276
%
0.02
0.23
0.36
6.21
93.17
1,073,954,032
100.00
The number of shareholders with less than a marketable parcel is 3,166 holding in total 37,820,621 shares.
VOTING RIGHTS
All ordinary shares issued by VDM Group Limited carry one vote per share without restriction.
93