ANNUAL
REPORT
2014
VDM GROUP LIMITED
and its Controlled Entities
ABN 95 109 829 334
VDM GROUP LIMITED
CORPORATE INFORMATION
Directors
Dr Dongyi Hua
Mr Michael Fry
Mr Vic Jakovich
Mr Hiuming Luk
Executive Chairman and
Interim Chief Executive Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
Company Secretary
Mr Padraig O’Donoghue
Registered and
Principal Office
Postal Address
Auditors
Share Register
Fortescue Centre
Level 1, 30 Terrace Road
East Perth WA 6004
Telephone (08) 9265 1100
Facsimile (08) 9265 1399
Website www.vdmgroup.com.au
Locked Bag 8
East 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 and its controlled entities
2
VDM GROUP LIMITED
CONTENTS
EXECUTIVE CHAIRMAN'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
7 - 26
27
28 - 35
36
37
38
39
40 - 88
89
90 - 91
92 - 93
3
VDM GROUP LIMITED
EXECUTIVE CHAIRMAN’S REPORT
OVERVIEW
I was appointed non-executive director of VDM on 28 August 2013 and commenced as CEO on 9 September 2013.
On 29 November 2013 I was appointed Executive Chairman. It is fair to say that the Company faced significant
financial challenges when I assumed the CEO position, as evidenced by the Company's $11.9 million loss recorded
for the first half of the year. The company also incurred losses in second half of the year, with the company recording
a $21.4 million loss for the full year. The primary reasons for these losses were: i) low profit performance on the
close-out of the existing suite of construction contracts, ii) call of $2.4 million of security bonds under the disputed
Jimblebar ANSF contract, iii) losses recorded on discontinued operations and iv) absence of new revenue streams
during the year.
Despite the challenges I assure you that the board and I have high ambitions for VDM. We are confident that VDM's
new business strategy will be transformational and VDM will become a strong and successful Australian company and
shareholders will be rewarded for their investment in the company.
Commencing this year, VDM had identifiable strengths that we could build on: a) it is a well-known engineering-
procurement-construction (EPC) brand with significant experience in the Australian market; b) it has invested in
systems and procedures for construction contract management, quality control, and safety; c) it has a fleet of well-
maintained construction equipment; and d) it has a skilled workforce.
During the year, we concentrated VDM’s turnaround in three areas: i) recapitalization through equity raisings, ii)
restructuring the company’s operations through divestments of non-core businesses and close-out of existing
contracts, and iii) introducing new management skills and business partners to implement VDM’s new business
strategy.
RECAPITALISATION
Net cash flow used in operating activities was $33.1 million during the year and therefore VDM undertook a number of
capital raisings to provide funding for the business:
On 27 August 2013, 140,080,961 shares were issued to H&H Holdings Australia Pty Ltd (H&H) raising
$1,401,000.
On 27 August 2013, a $5,000,000 convertible loan was received from H&H that was converted into
500,000,000 shares by shareholder approval on 29 November 2013.
On 29 November 2013, 143,997,917 shares were issued to Jimblebar creditors at $0.01 per share.
On 10 December 2013, 75,000,000 shares were issued to a private investor raising $750,000.
On 17 January 2014, 1,214,685,617 shares were issued pursuant to a non-renounceable entitlement offer
(400,000,000 to underwriter H&H, 500,000,000 to sub-underwriter Australia Kengkong Investments Co Pty
Ltd (Kengkong), and 778,531,439 under acceptances by other shareholders) raising $12,146,856,
comprising 68 per cent of the offer.
On 19 March 2014, 120,000,000 shares were issued to Kengkong raising $1,200,000.
On 5 May 2014, a $4,500,000 convertible loan was received from Kengkong, convertible to 450,000,000
shares upon shareholder approval and at the option of Kengkong.
As announced on 23 September 2014, VDM executed an agreement with Kengkong to provide a further $10,000,000
of funding via a loan which, subject to shareholder approval, is convertible into 1,000,000,000 shares at the option of
Kengkong. VDM shareholders will have the opportunity to consider approving the conversion to shares of both this
convertible loan and the preceding $4,500,000 convertible at the Company’s Annual General Meeting to be held
before the end of November 2014.
I would like to thank Kengkong and H&H for supporting these capital raisings, as well as the other shareholders who
took up their share rights under the December 2013 entitlement offer.
RESTRUCTURING
The Queensland Construction business and the remaining Queensland and Western Australian Engineering
Consulting businesses were sold in the first-half of the year. Although these divestments resulted in recognition of
losses from discontinued operations of $6.7 million, exiting these businesses was considered an urgent and
necessary measure to halt the cash outflows that would be required to maintain them.
Another priority was the prompt efficient completion of the existing construction contracts. Contracts in progress was
reduced from $7.8 million on the balance sheet at the beginning of the year to very close to nil at year end.
These business divestments and project close-outs have resulted in a workforce reduction from 347 employees at the
start of the year to 42 at the end of the year. The restructuring has simplified and rationalised the business which
allows the board and management to concentrate VDM's resources on implementation of the new business strategy.
4
VDM GROUP LIMITED
EXECUTIVE CHAIRMAN’S REPORT
NEW BUSINESS STRATEGY
VDM’s new business strategy will be arranged under four operating divisions in financial year 2015:
VDM Construction: EPC including modular and steel construction
VDM Equipment: equipment hire, sales, service, and parts
VDM Trading: procuring quality Asian products for the Australian market
VDM Mining: bringing Australian mining practices to Africa and Latin America
VDM Construction
We have provided more focus to VDM Construction’s EPC capabilities by improving the division’s market
competitiveness in customised modular buildings, steel buildings, and other steel construction projects. Cooperation
agreements have been completed with BNBM (one of China’s leading modular construction companies) and Ansteel
Construction (a leading Chinese steel manufacturer) so that VDM can now provide highly competitive construction
solutions in this market segment. VDM has also added experienced specialist skills in Australian modular and steel
construction to its management team. VDM Construction can now deliver modern and technically-innovative custom
buildings to the Australian market-place at highly competitive prices. This type of construction technology also
provides customers with a cost advantage in terms of completion timeframes which are significantly shorter than
normal construction methods.
Efforts were concentrated on completing the large suite of existing contracts and no new construction contracts were
signed before the end of the financial year, however, VDM Construction now has a clear strategy and a highly
competitive offering that we believe will result in VDM winning new construction contracts during FY15.
VDM Equipment
As announced on 24 June 2014, VDM has signed a letter of intent to establish a joint venture with SANY Heavy
Machinery (JV). SANY is a leading manufacturer and well-established brand of heavy equipment in Asia. SANY’s
strategy is focused around product innovation, product quality, customer service and price competitiveness. VDM is
proud to partner with SANY and is confident this innovative and successful brand will flourish in Australia.
The JV company has been registered and VDM and SANY representatives are progressing plans and schedules for
the JV including equipment fleet delivery, showroom and workshop premises, sales and promotion activities, and
additional staffing requirements. VDM has already commenced hiring SANY equipment to customers and has
ordered more equipment from the SANY to offer for hire and sale within the joint venture in the coming months. Plans
are also underway for the JV to hold a large expo in Perth, Western Australia to formally launch the JV and showcase
the SANY product range.
VDM aims to reproduce similar JV arrangements with other established Asian manufacturers of high-quality
equipment who want more success in the Australian market. The model significantly improves the competitive
offering for these manufacturers through: 1) delivery of professional and knowledgeable after-sales maintenance and
repair service, 2) improved Australian spare parts inventory management and parts sales, and 3) offering customers
flexible and attractive equipment hire arrangements.
VDM Trading
VDM Trading is a procurement service for high-quality and either custom-designed or ready-made products from Asia.
VDM has now established an experienced procurement team in Perth specialising in construction and industrial
products from Asian manufacturers. VDM has also forged commercial arrangements with leading Chinese brands,
such as BNBM and Ansteel Construction to improve the competitiveness of the offering to VDM customers.
VDM Trading leverages the technical capabilities of VDM Construction and VDM Equipment to provide customers with
more assurance that their needs are fully understood and will be satisfied by the products procured from Asia. VDM
Trading also has a business objective of assisting Australian businesses who would like to export products to Asian
markets.
VDM Mining
VDM plans to bring the advantages of Australia’s mining knowledge, technology and practices to mining opportunities
in Africa and Latin America. Australia’s modern and advanced mining industry has world-class capability and
reputation in all mining stages including exploration, feasibility, design, construction, and operation. The Australian
mining industry’s safety record and environmental practices in Australia are internationally highly regarded. VDM
intends to provide these advantages to projects in Africa and Latin America.
5
VDM GROUP LIMITED
EXECUTIVE CHAIRMAN’S REPORT
SAFETY
I am pleased to report that VDM had another positive safety performance with no Lost Time Injuries in the year and a
LTIFR of nil. Safety is a fundamental plank of VDM’s business and we will continue to ensure that safety is a top
priority.
CONCLUSION
During the second-half of the year we welcomed two new directors to the VDM board: Mr Vic Jakovich, an
independent director and Mr Hiuming Luk who is the nominee director of significant shareholder, Kengkong. Both are
successful entrepreneurs and business leaders who provide tremendous value to VDM.
I would again like to thank our shareholders for their support during a challenging period for the Company.
Sincerely
Dr D Hua
Executive Chairman and Interim CEO
6
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
Your directors submit their report for the year ended 30 June 2014.
DIRECTORS
The names and details of the directors of VDM Group Limited (“VDM” 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
Dongyi Hua, Dr
Executive Chairman and Interim Chief Executive Officer
Initially appointed Director on 28 August 2013, Managing Director on 9 September 2013 and Executive Chairman and
Interim Chief Executive Officer on 29 November 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 is also the Vice
President of the Australian China Business Council Western Australia. Dr Hua holds a Doctorate of Engineering from
the China University of Geosciences. Dr Hua has a relevant interest (as defined section 608 of the Corporations Act
2001) in H&H Holdings Australia Pty Ltd (H&H).
Michael Fry, BCom
Non-Executive Director
Appointed 3 June 2011
Chairman of the Audit & Risk Committee
Member of the Nominations & Remuneration Committee
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). From 2006 to 2011, 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. Since 2011 Mr Fry has been Chief
Financial Officer and Company Secretary of Cougar Metals NL, a publicly listed gold exploration and drilling services
company operating in Brazil.
Velko (Vic) Jakovich
Non-Executive Director
Appointed 1 February 2014
Member of the Nominations & Remuneration Committee
Mr Jakovich has held executive positions including Managing Director of Stulz Australia Pty Ltd, Treasurer, Deputy
Chair and Chair of Villa Dalmacia Nursing Home and non-executive positions as Board Member of St John of God
Foundation for 7 years and Chair of steering committee to develop case for raising $20m towards construction of
$50m Comprehensive Cancer Centre at St John of God Campus Subiaco and Non-Executive Director of Stulz
Australia Pty Ltd. Mr Jakovich is a senior partner in Jako Industries Pty Ltd and is its Managing Director.
Hiuming Luk
Non-Executive Director
Appointed 21 March 2014
Member of the Audit & Risk Committee
Member of the Nominations & Remuneration Committee
Mr Luk has extensive experience in a range of business sectors. In 2000, he set up the C.N.Team Ltd and Y.Z.I.T.
Inc. He has invested in real estate in mainland China since 2001 and now invests in a variety of industries, including
textile & clothing, steel, and new energy industries. Mr Luk is currently Chairman of the boards of C.N.Team Ltd,
Y.Z.I.T. Inc, Wholly Fast International Ltd，Bondcooper Brothers Co Ltd, and Sunshine Real Estate Development Co
Ltd.
7
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
Past directors that resigned during the year and until the date of this report
Michael Perrott AM, B.Com, FAIM, FAICD
Initially appointed Non-Executive Director on 2 July 2009, appointed Chairman on 26 November 2010 and Deputy
Chairman on 29 November 2013.
Mr Perrott resigned as a Director on 7 August 2014.
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
Xiangyang Ru
Appointed 28 August 2013
Mr Ru resigned as a Director on 1 February 2014.
Barry Nazer, BBus, FCPA, FFin, ANZIIF (Fellow), FAICD
Appointed 1 October 2008
Mr Nazer resigned as a Director on 29 November 2013.
Current directorships of ASX listed companies:
Coventry Group Limited – Non-Executive Director since September 2003
Richard Mickle, B.Eng, FIEAust, FAICD
Appointed 3 June 2011
Mr Mickle resigned as a Director on 29 November 2013.
Andrew Broad
Appointed 16 January 2012
Mr Broad was terminated as Managing Director and Chief Executive Officer on 23 August 2013.
COMPANY SECRETARY
Padraig O’Donoghue, BComm, CA
Appointed 12 February 2014
Mr O’ Donoghue is VDM’s Chief Financial Officer and Company Secretary. He has significant experience as CFO
and Company Secretary to Australian companies. He has been CFO/Company Secretary of mining companies:
Consolidated Rutile Limited (ASX:CRT), Jabiru Metals Limited (ASX:JML) and Navigator Resources Limited
(ASX:NAV). He was also CFO and Company Secretary of mining contractor Barminco. His early career includes
PriceWaterhouseCoopers in Vancouver, Canada and 10-years with Barrick Gold in both head office and international
Commercial Manager operational roles.
Past Company Secretaries that resigned during the year and until the date of this report
Samantha Drury was appointed as Company Secretary on 23 August 2013 and terminated on 12 February 2014.
Michael Fry was appointed Company Secretary on 12 June 2013, as an interim measure until Mrs Drury’s
appointment on 23 August 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
D Hua
M Fry
V Jakovich
H Luk
DIVIDENDS
Number of
Ordinary Shares
1,085,110,976
1,000,000
21,219,720
620,000,000
There were no dividends declared or paid during the year ended 30 June 2014.
8
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
NATURE AND PRINCIPAL ACTIVITIES
VDM’s principal activities during the year were engineering designing and constructing (EPC) within the land
development, road construction and resource industries. The activities were reduced during the year with the sale of
VDM Construction (Eastern Operations) Pty Ltd (VDM Construction (Eastern Operations)) and VDM’s engineering
consulting businesses. Under the prior year’s segment reporting these businesses were reported under ‘Eastern
construction’ and ‘Consulting’ segments, respectively.
General
At 30 June 2014, VDM employed 42 people in Western Australia (30 June 2013: 347 across Australia).
OPERATING AND FINANCIAL REVIEW
Gross profit from continuing operations of $731,000 is significantly better than the prior year gross loss of
$20,609,000. This line item reflects the combined profit result of work undertaken on construction contracts in the
year. The prior year was negatively impacted by significant losses that were recorded on several large construction
projects.
Revenue from continuing operations of $24,590,000 represents a decrease of 80.8 per cent in comparison with the
prior year. VDM’s construction activities were significantly reduced during the year as the Company concentrated on
completing the large suite of active construction contracts and no new construction contracts were commenced in the
year. Cost of services of continuing operations of $23,859,000 is 83.9 per cent below the prior year reflecting the
reduced construction activities.
Loss from continuing operations before tax of $16,406,000 is a 72.0 per cent improvement on the prior year’s
$58,552,000 loss. The prior year loss result was significantly impacted by impairment expenses charged to goodwill
of $16,717,000 and $881,000 of other impairment expenses. The current year result has significantly lower
impairment expenses of $101,000 charged to leasehold improvements. Administration expenses of $17,039,000 are
15.4 per cent lower than the prior year reflecting the downsizing of the business that occurred over the year, offset by
increased redundancy costs, increased provision for onerous leases, and reduced asset disposal gains. Additionally,
administration expenses include $2,983,000 of impairment losses on receivables due from a customer for work done
on the Jimblebar ANSF contract.
The loss after tax was $21,378,000 (2013: $84,408,000 loss). This loss includes losses from discontinued operations
of $6,678,000 (2013: $10,951,000).
Re-capitalisation
Net cash flow used in operating activities was $33,066,000 during the year and therefore VDM undertook a number of
capital raisings to provide funding for the business:
On 27 August 2013, 140,080,961 shares were issued to H&H Holdings Australia Pty Ltd (H&H) raising
$1,401,000 before capital raising costs.
On 27 August 2013, a $5,000,000 convertible loan was received from H&H that was converted into
500,000,000 shares by shareholder approval on 29 November 2013.
On 29 November 2013, 143,997,917 shares were issued to Jimblebar creditors at $0.01 per share.
On 10 December 2013, 75,000,000 shares were issued to a private investor raising $750,000 before capital
raising costs.
On 17 January 2014, 1,214,685,617 shares were issued pursuant to a non-renounceable entitlement offer
(400,000,000 to underwriter H&H, 500,000,000 to sub-underwriter Australia Kengkong Investments Co Pty
Ltd (Kengkong), and 778,531,439 under acceptances by other shareholders) raising $12,147,000 (before
capital raising costs), comprising 68 per cent of the offer.
On 19 March 2014, 120,000,000 shares were issued to Kengkong raising $1,200,000 before capital raising
costs.
On 5 May 2014, a $4,500,000 convertible loan was received from Kengkong, convertible to 450,000,000
shares upon shareholder approval and at the option of Kengkong.
Business strategy
VDM’s new business strategy is arranged under four operating divisions:
VDM Construction: EPC including modular and steel construction
VDM Equipment: equipment hire, sales, service, and parts
VDM Trading: procuring quality Asian products for the Australian market
VDM Mining: bringing Australian mining practices to Africa and Latin America
9
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
VDM Construction
VDM Construction’s engineering-procurement-construction (EPC) capabilities are now focused on improving the
division’s market competitiveness in customised modular buildings, steel buildings, and other steel construction
projects.
VDM Equipment
As announced on 24 June 2014, VDM has signed a letter of intent to establish a joint venture with SANY Heavy
Machinery (JV). SANY is a leading manufacturer and well-established brand of heavy equipment in Asia. VDM aims
to reproduce similar JV arrangements with other established Asian manufacturers of high-quality equipment who want
more success in the Australian market. The model significantly improves the competitive offering for these
manufacturers through: 1) delivery of professional and knowledgeable after-sales maintenance and repair service, 2)
improved Australian spare parts inventory management and parts sales, and 3) offering customers flexible and
attractive equipment hire arrangements.
VDM Trading
VDM Trading is a procurement service for high-quality and either custom-designed or ready-made products from Asia.
VDM has now established an experienced procurement team in Perth specialising in construction and industrial
products from Asian manufacturers. VDM has also forged commercial arrangements with leading Chinese brands,
such as BNBM and Ansteel Construction to improve the competitiveness of the offering to VDM customers. VDM
Trading leverages the technical capabilities of VDM Construction and VDM Equipment to provide customers with
more assurance that their needs are fully understood and will be satisfied by the products procured from Asia. VDM
Trading also has a business objective of assisting Australian businesses who would like to export products to Asian
markets.
VDM Mining
VDM plans to bring the advantages of Australia’s mining knowledge, technology and practices to mining opportunities
in Africa and Latin America. Australia’s modern and advanced mining industry has world-class capability and
reputation in all mining stages including exploration, feasibility, design, construction, and operation. The Australian
mining industry’s safety record and environmental practices in Australia are internationally highly regarded. VDM
intends to provide these advantages to projects in Africa and Latin America.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
The number of ordinary shares on issue increased 70.1 per cent from 933,873,071 shares at 30 June 2013 to
3,127,660,952 shares at 30 June 2014. The increase resulted from capital raisings that occurred during the year to
fund ordinary ongoing operations as outlined above in the ‘Re-capitalisations” section of this report.
On 21 August 2013 BHP Billiton (BHP) notified VDM that it was terminating the Jimblebar ANSF contract and
instructed all VDM staff to exit the work site and camp facilities. A dispute under this contract between VDM and BHP
is ongoing. Additionally, on 19 December 2013 BHP claimed and was paid $2,422,000 under surety bonds issued by
VDM under the Jimblebar ANSF contract. VDM was subsequently required to repay $2,422,000 to Asset Insure, the
surety bond provider and deposit a further $2,500,000 into a cash account held as security for Asset Insure on the
value of bonds issued for VDM. The surety bond provider will not consent to release of the cash security until the
value of the surety bonds issued for VDM is reduced below the $2,500,000 of cash held in the security deposit
account The value of surety bonds issued for VDM at 30 June 2014 is $5,287,000.
In the first half of the year, VDM sold the Queensland construction business (VDM Construction (Eastern Operations)
Pty Ltd) and all the remaining engineering consulting businesses. Under the prior year’s segment reporting these
businesses were reported under the ‘Eastern construction’ and ‘Consulting’ segments, respectively.
On 5 May 2014, VDM executed a convertible loan and facility agreement with Australia Kengkong Investments Co Pty
Ltd (Kengkong) ($4.5 million Convertible Loan) to provide funding of $4,500,000 for ordinary ongoing operations.
Kengkong advanced $4,500,000 under the $4.5 million Convertible Loan on 6 May 2014. The loan is unsecured.
Subject to shareholder approval, and upon such approval being granted, Kengkong will have the right to convert the
loan into 450,000,000 ordinary shares at a conversion price of $0.01 per share. If shareholder approval is not
obtained or the loan is not converted into VDM shares by Kengkong, VDM must repay the loan by the later of 5
September 2014 and 30 business days after the date of the shareholder meeting held to obtain approval
(Shareholders Meeting). If shareholder approval is not obtained then VDM must pay a fee of $45,000. An interest
rate of 10% per annum applies on the loan until 20 October 2014 at which time the interest rate increases to 15% per
annum. A default interest rate of 2% per annum plus the applicable interest rate shall apply to any amount the
Company fails to pay by the time it is due under the agreement.
10
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
Michael Perrott resigned as a Director of VDM on 7 August 2014.
On 22 September 2014, VDM executed a convertible loan and facility agreement with Kengkong to provide funding of
$10,000,000 for ordinary ongoing operations and project development proposals which are approved by Kengkong
($10m Convertible Loan) The $10m Convertible Loan is unsecured. Subject to shareholder approval, and upon such
approval being granted, Kengkong will have the right to convert the $10m Convertible Loan into 1,000,000,000
ordinary shares at a conversion price of $0.01 per share. If shareholder approvals for conversion of both the $10m
Convertible Loan and the $4.5m Convertible Loan are not obtained, or Kengkong does not elect to convert the $10m
Convertible Loan into VDM shares then VDM must repay the $10m Convertible Loan within 60 business days after the
shareholders meeting held to obtain approval (Shareholders Meeting). Interest is calculated at a rate of 8% per
annum until one month after the date of the Shareholders Meeting, and 13% per annum following that date. A default
interest rate of 2% per annum plus the applicable interest rate shall apply to any amount the Company fails to pay by
the time it is due under the agreement. In the event that shareholders do not approve conversion of the $4.5m
Convertible Loan and the $10m Convertible Loan, a fee of A$100,000 is payable by VDM in addition to the $45,000
fee payable in respect of the non-approval by shareholders of conversion of the $4.5m Convertible Loan. Conversion
matters for both the $10m Convertible Loan and the $4.5m Convertible loan will be presented for consideration by
shareholders at the Company’s Annual General Meeting to be held before the end of November 2014.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
VDM will be undertaking future capital raisings sufficient to fund ordinary ongoing operations and to grow the business
until new revenue streams are established in the Construction, Equipment, Procurement and Mining divisions and the
Company has to access debt capital markets. Any such capital raisings plans are currently incomplete and uncertain.
ENVIRONMENTAL REGULATION AND PERFORMANCE
VDM's operations are subject to environmental regulations under Commonwealth and State legislation. The Board
believes that VDM 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.
SHARE OPTIONS
As at the date of this report, there were no unissued ordinary shares under option (2013: 464,992,686).
During the year, 43,386 options were exercised and the remaining options expired on 30 November 2013.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
VDM 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.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, VDM has agreed to indemnify it auditors, Ernst & Young (EY) against claims by third
parties arising from the audit (for an unspecified amount). This is consistent with EY’s standard audit engagement
terms. No payment has been made to indemnify EY during or since the financial year.
11
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
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:
Number of meetings held:
Number of meeting attended:
D Hua
M Fry
V Jakovich
H Luk
Past directors
M Perrott
B Nazer
R Mickle
A Broad
X Ru
Meetings of committees
Directors’
meetings
17
Audit & Risk
5
Nominations
&
Remuneration
1
13
17
4
1
16
10
9
3
2
3
5
1
-
3
2
-
-
-
1
1
1
-
1
1
1
-
-
As at the date of this report, VDM had an audit & risk committee and a nomination & remuneration committee of the
board of directors. Members acting on the committees of the board during the year were:
Audit & Risk
M Fry (Chairman)
D Hua
M Perrott
V Jakovich
H Luk
B Nazer
Nominations &
Remuneration
M Perrott (Chairman)
D Hua
M Fry
V Jakovich
H Luk
AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
The directors received an Independence Declaration from the auditor of VDM, attached on page 27. 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 37 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.
12
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
REMUNERATION REPORT (AUDITED)
This remuneration report for the year ended 30 June 2014 outlines the remuneration arrangements of VDM 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.
The remuneration report details the remuneration arrangements for key management personnel (KMP) of VDM are
defined as those persons having authority and responsibility for planning, directing and controlling the major activities
of VDM, directly or indirectly, including any director (whether executive or otherwise) of the parent company.
For the purposes of this report, the term 'executive' includes the Interim Chief Executive Officer (CEO), executive
directors and other senior executives of VDM.
The remuneration report is presented under the following sections:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Individual KMP disclosures
Board oversight of remuneration
Executive remuneration arrangements
Executive remuneration outcomes for 2014 (including link to performance)
Executive contracts
Non-Executive Director remuneration arrangements
Additional statutory disclosure relating to options and shares
Loans to key management personnel
Other transactions and balances with key management personnel and their related entities
1.
Individual KMP disclosures
Details of KMP including the executives of the VDM are set out below.
Current directors
D Hua
M Fry
V Jakovich
H Luk
Past directors
M Perrott
R Mickle
B Nazer
X Ru
A Broad
Current executives
P O’Donoghue
Past executives
S Drury
R Gregg
J Kemp
Executive Chairman and Interim Chief Executive Officer Managing Director -–
appointed director on 28 August 2013, Managing Director on 9 September 2013 and
Executive Chairman and Interim Chief Executive Officer on 29 November 2013
Non – Executive Director
Non – Executive Director -– appointed on 1 February 2014
Non – Executive Director -– appointed on 21 March 2014
Chairman until 29 November 2013 and then Deputy Chairman until his resignation
on 7 August 2014. Acting CEO from 23 August 2013 to 6 September 2013.
Non – Executive Director -– resigned on 29 November 2013
Non – Executive Director -– resigned on 29 November 2013
Non – Executive Director -– appointed on 28 August 2013 and resigned on 1
February 2014
Managing Director -– terminated on 23 August 2013
Chief Financial Officer and Company Secretary – appointed on 12 February 2014
Chief Financial Officer and Company Secretary – appointed on 24 June 2013 and
resigned on 12 February 2014
Executive General Manager – Eastern Construction and Consulting – terminated on
11 October 2013
General Manager – Western Construction – appointed on 7 November 2012 and
resigned on 6 September 2013
13
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
2.
Board oversight of remuneration
Nominations and Remuneration Committee
The Nominations and Remuneration Committee comprises four non-executive directors and one executive director.
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 Board approves the remuneration arrangements of the Interim CEO and other 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
Interim CEO, the level of the VDM short-term incentive (STI) pool.
In accordance with good corporate governance practice, the structure of non-executive director and executive
remuneration is separate and distinct.
Remuneration report approval at 2013 Annual General Meeting
The 2013 remuneration report was approved at the 2013 Annual General Meeting with a note of 94 per cent in favour.
3.
Executive remuneration arrangements
Remuneration strategy
VDM’s executive remuneration strategy is designed to attract, motivate and retain high performing individuals and
align the interests of executives and shareholders.
To this end, key objectives of the Company’s reward framework are to ensure that remuneration practices:
Are aligned to the VDM’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 levels and mix
VDM aims to reward executives with a level and mix of remuneration commensurate with their position and
responsibilities within VDM and aligned with market practice.
VDM’s policy is to position total employment cost (TEC) close to the median of its defined talent market to ensure a
competitive offering. VDM undertakes an annual remuneration review to determine the total remuneration positioning
against the market.
The Interim CEO’s remuneration mix comprises 40% fixed remuneration as a proportion of total remuneration, 30%
maximum STI and 30% maximum LTI.
14
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
Structure
The executive remuneration framework consists of the following components:
Fixed remuneration; and
Variable remuneration
The table below illustrates the structure of VDM’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
STI component
Paid in cash
Rewards executives for
their contribution to
achievement of VDM 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’s TSR performance
relative to ASX 200 Industrial
Index
15
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
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 operates an annual STI program that is available to executives and awards a cash bonus subject to the
attainment of clearly defined VDM 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 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 financial and
non-financial, corporate and individual measures of performance.
Performance measures
Financial threshold
VDM and divisional Earnings before Interest and Tax (EBIT)
Financial measure:
VDM and divisional 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
No award unless
minimum financial
thresholds achieved
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 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.
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 2014 financial year.
Variable remuneration — long term incentive (LTI)
Under the LTI plan, KMP may be offered performance rights under the VDM 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).
16
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
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 being profitable during the two year period from the effective offer
date.
In the event that VDM 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 to KMP 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 remaining
17,826,087 performance rights lapsed following the termination of Mr Broad on 23 August 2013 and Mr Gregg on 11
October 2013.
KMP did not meet the predetermined performance and vesting conditions in the 2013 financial year. No additional
performance rights were approved by the Nominations & Remuneration Committee in 2014.
17
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
4.
Executive remuneration outcomes for 2014 (including link to performance)
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’s gross EBIT history for the past five years (including the current period).
EBIT
$’000
(16,287)
(58,769)
(29,759)
(62,810)
25,594
Closing
share price
(cents per
share)
0.01
0.01
0.05
0.07
0.15
2014
2013
2012
2011
2010
As a result of the negative EBIT performance in 2013, no STI awards were made in the 2014 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. A total of 34,391,304 performance rights were offered to KMP 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
remaining 17,826,087 performance rights lapsed following the termination of Mr Broad on 23 August 2013 and Mr
Gregg on 11 October 2013.
The graph below shows VDM’s TSR performance relative to the ASX-200 Industrial group since grant date on 1
December 2011. KMP did not meet the predetermined performance and vesting conditions in the 2014 financial year.
As a result, no additional performance rights were approved by the Nominations & Remuneration Committee in 2014.
)
0
0
1
o
t
d
e
s
a
b
e
r
(
R
S
T
200
150
100
50
-
VMG share price
ASX 200 Industrial Group
18
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
Table 1: Executive remuneration for the year ended 30 June 2014
SHORT TERM
POST
EMPLOYMENT
Base
Salary &
Fees
$
Cash
Bonus
$
Non-
Monetary
Benefits
$
Executive directors
D Hua
495,122
Past executive directors
A Broad1
133,522
Current key management personnel
P O’Donoghue2
88,166
Past key management personnel
S Drury3
R Gregg4
J Kemp5
157,743
118,516
109,229
Notes:-
1,102,298
-
-
-
-
-
-
-
-
-
-
-
-
EQUITY
SETTLED
SHARE
BASED
PAYMENT
Value of
Performance
Rights
$
Termination
Benefits
Total
Performance
Related
$
$
-
511,694
%
-
Super
Contributions
$
16,572
5,833
(94,394)
312,500
357,461
(26%)
7,280
13,331
18,509
-
-
-
-
95,446
58,176
229,250
-
-
(153,690)
72,229
55,564
(277%)
-
-
109,229
-
61,525
(248,084)
442,905
1,358,644
(18%)
1. A Broad was terminated as Managing Director and Chief Executive Officer on 23 August 2013.
2. P O’Donoghue was appointed as Chief Financial Officer and Company secretary on 12 February 2014.
3. S Drury was terminated as Chief Financial Officer and Company secretary on 12 February 2014.
4. R Gregg was terminated with effect from 11 October 2013.
5.
J Kemp was appointed with effect from 7 November 2012 and resigned on 6 September 2013.
Table 2: Executive remuneration for the year ended 30 June 2013
SHORT TERM
POST
EMPLOYMENT
Base
Salary &
Fees
$
Cash
Bonus
$
Non-
Monetary
Benefits
$
Super
Contributions
$
EQUITY
SETTLED
SHARE
BASED
PAYMENT
Value of
Performance
Rights
$
Past executive directors
A Broad1
556,730
70,0002
Current key management personnel
R Gregg
S Drury3
410,620
-
Past key management personnel
J Kemp4
R Gonzales5
D Coyne6
T Fallon7
384,206
216,649
239,418
233,331
-
-
-
-
-
-
Notes:-
2,040,954
70,000
-
-
-
-
-
-
-
-
Termination
Benefits
Total
Performance
Related
25,000
(20,635) 1
53,128
97,222
$
631,095
%
3%
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
135,755
(82,779)
35,649
2,199,579
-
-
(26%)
(10%)
(36%)
-
1. 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.
J Kemp was appointed with effect from 7 November 2012 and resigned on 6 September 2013.
2. The bonus paid to Mr Broad relates to a correction of his 2012 STI.
3. S Drury was appointed with effect from 24 June 2013.
4.
5. R Gonzales was terminated with effect from 25 January 2013.
6. D Coyne resigned with effect from 12 June 2013.
7. T Fallon resigned with effect from 27 November 2012.
19
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
5.
Executive contracts
Remuneration arrangements for KMP are formalised in employment agreements. Details of these contracts are
provided below.
Interim CEO
The Interim CEO is employed under a rolling contract.
With effect from 9 September 2013, the remuneration of the Interim CEO 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 Interim CEO termination provisions are as follows:
Notice period
Employer-initiated
termination
6 months
Payment in lieu of
notice
6 months
None
None
3 months
3 months
Termination for
serious
misconduct
Employee-initiated
termination
Other KMP
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
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 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.
Ms Drury received a termination payment of $58,176, in accordance with the terms of her employment contract.
Mr Gregg received a termination payment of $72,229, in accordance with the terms of his employment contract.
20
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
6.
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.
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 Deputy Chairman of the Board
attends all committee meetings but does not receive any additional fees.
The table below summarises the NED fees for 2014:
Board fee
Chairman of the Board1
Deputy Chairman of the Board
Chairman of the Audit and Risk
Committee
Notes:-
Annual NED fees
including
superannuation
$75,000
$65,000
$96,000
$10,000
1. M Perrott was Chairman of the Board until 29 November 2014 and subsequently was appointed Deputy Chairman. M
Perrott resigned on 7 August 2014.
21
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
Table 3: Non- Executive remuneration for the year ended 30 June 2014
SHORT TERM
POST
EMPLOYMENT
Base
Salary &
Fees
$
Current non-executive directors
M Fry
V Jakovich2
H Luk3
75,885
28,604
19,011
Past non-executive directors
M Perrott1
B Nazer4
R Mickle5
34,413
30,364
186,337
Notes:-
374,614
Cash
Bonus
$
-
-
-
-
-
-
-
Non-
Monetary
Benefits
$
-
-
-
-
-
-
-
Super
Contributions
$
7,019
2,646
1,758
-
3,183
2,809
17,415
EQUITY
SETTLED
SHARE
BASED
PAYMENT
Value of
Performance
Rights
$
-
-
-
-
-
-
-
Termination
Benefits
Total
Performance
Related
$
$
-
-
-
-
-
-
-
82,904
31,250
20,769
186,337
37,596
33,173
392,029
%
0%
0%
0%
0%
0%
0%
0%
1. M Perrott was acting CEO for the period 23 August 2013 to 6 September 2013 and was Chairman of the Board until 29
November 2013. He resigned as a Director of VDM on 7 August 2014.
2. V Jakovich was appointed as Director of VDM on 1 February 2014.
3. H Luk was appointed as Director of VDM on 21 March 2014.
4. B Nazer resigned as a Director of VDM on 29 November 2013.
5. R Mickle resigned as a Director of VDM on 29 November 2013.
Table 4: Non- Executive 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
Notes:-
346,677
Cash
Bonus
$
-
-
-
-
-
-
Non-
Monetary
Benefits
$
-
-
-
-
-
-
1. T Crossley resigned with effect from 24 October 2012.
Super
Contributions
$
-
6,650
5,311
5,311
2,096
19,368
EQUITY
SETTLED
SHARE
BASED
PAYMENT
Value of
Performance
Rights
$
-
-
-
-
-
-
Termination
Benefits
Total
Performance
Related
$
-
-
-
-
-
-
$
%
131,488
80,541
64,316
64,316
25,384
366,045
-
-
-
-
-
-
22
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
7.
Additional disclosures relating to options and shares
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 5: Performance rights awarded and vested during the year ended 30 June 2014
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
-
1 December 2011
$0.012
1 December 2013
1 December 2014
-
11,956,522
Past key management personnel
R Gregg2
-
-
Notes:
1 December 2011
$0.0398
1 December 2013
1 December 2014
-
-
5,869,565
17,826,087
1. A Broad was terminated as Managing Director with effect from 23 August 2013 and his performance rights lapsed upon his date of
termination.
2. R Gregg was terminated with effect from 11 October 2013 and his performance rights lapsed upon his date of termination.
23
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
Table 6: Shareholdings of key management personnel
Balance 1 July
2013
Granted as
remuneration
Options
exercised
Net change
other
Balance
30 June 2014
-
500,000
-
-
6,200,000
1,228,568
1,200,000
3,400,164
86,605
12,615,337
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,085,110,976
500,000
21,219,720
620,000,000
1,085,110,976
1,000,000
21,219,720
620,000,000
6,200,000
(1,228,568)))
(1,200,000)
12,400,000
-
-
(3,400,164)
(86,605)
-
-
1,727,115,359
1,739,730,696
Current directors
D Hua1
M Fry2
V Jakovich
H Luk3
Past directors
M Perrott2
B Nazer4
A Broad5
Past executives
R Gregg6
J Kemp7
Total shareholding
Notes:
1.
Issued 140,080,961 shares to H&H on 27 August, post this H&H held 185,110,976 shares. Issued 500,000,000 conversion
shares on 29 November 2013. H&H exercised 400,000,000 of their rights under the entitlements offer detailed in the
prospectus dated 10 December 2013.
2. M Perrott and M Fry exercised their rights under the entitlements offer detailed in the prospectus dated 10 December
3.
2013. M Perrott subsequently resigned as a Director on 7 August 2014.
Issued 500,000,000 shares to Kengkong in terms of the Sub-Underwriting agreement with H&H as detailed in the
prospectus dated 10 December 2013. Issued a further 120,000,000 shares to Kengkong on19 March 2014 under the
Shortfall Offer contained in the 10 December 2013 entitlement offer prospectus.
4. B Nazer’s balance reduced to nil during the year as he resigned as a Non- Executive Director of VDM on 29 November
2013
5. A Broad’s balance reduced to nil during the year as he was terminated as Managing Director with effect from 23 August
2013.
6. R Gregg’s balance reduced to nil during the year as he was terminated on 11 October 2013.
7.
J Kemp was appointed on 7 November 2012 and resigned on 6 September 2013.
Table 7: Option holdings of key management personnel
Balance 1 July
2013
Granted as
remuneration
Options
exercised
Net change
other
Balance
30 June 2014
Current directors
M Perrott1
M Fry1
Past directors
B Nazer2
A Broad3
Past executives
R Gregg4
Total option holding
Notes:
3,100,000
250,000
614,284
350,000
1,700,082
6,014,366
-
-
-
-
-
-
-
-
-
-
-
-
(3,100,000)
(250,000)
(614,284)
(350,000)
(1,700,082)
(6,014,366)
-
-
-
-
-
-
1. The listed options expired on 30 November 2013.
2. B Nazer’s balance reduced to nil during the year as he resigned as a Non- Executive Director of VDM on 29 November
2013.
3. A Broad’s balance reduced to nil during the year as he was terminated as Managing Director with effect from 23 August
2013.
4. R Gregg’s balance reduced to nil during the year as he was terminated on 11 October 2013.
24
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
Table 8: Performance rights holdings of key management personnel
Past directors
A Broad1
Past executives
R Gregg
Total option holding
Notes:
Balance 1 July
2013
Granted as
remuneration
Rights
exercised
Net change
other
Balance
30 June 2014
11,956,522
5,869,565
17,826,087
-
-
-
-
-
-
(11,956,522)
(5,869,565)
(17,826,087)
-
-
-
1. A Broad was terminated as Managing Director with effect from 23 August 2013 and his performance rights lapsed upon
his date of termination.
2. R Gregg was terminated with effect from 11 October 2013 and his performance rights lapsed upon his date of termination.
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 would have adopted if dealing at arm’s
length.
8.
Loans to key management personnel
There were no loans granted to KMP during the year ended 30 June 2014 and 2013.
9.
Other transactions and balances with key management personnel and their related entities
(a)
Details and terms and conditions of other transactions with KMP and their related parties:
H&H
On 29 October 2013, VDM entered into a $4,000,000 unsecured loan facility with H&H and the loan was subsequently
fully drawn by VDM. Upon shareholder approval at the 29 November 2013 Annual General Meeting, VDM granted a
general security to H&H in respect of the loan facility. The loan was repaid in full on 28 January 2014 with funds raised
in the entitlements offer. H&H were entitled to interest of $65,000, which was still outstanding at 30 June 2014.
The $5,000,000 convertible loan issued to H&H loan on 27 August 2013 was approved and converted into
500,000,000 ordinary shares at $0.01 per share at the Company’s 29 November 2013 Annual General Meeting. H&H
was entitled to interest of $108,000, which was still outstanding at 30 June 2014.
H&H exercised 400,000,000 of their rights under the entitlements offer detailed in the prospectus dated 10 December
2013. H&H was entitled to an underwriting fee of $75,000 which was still outstanding at 30 June 2014.
At 30 June 2014, H&H held 1,085,110,976 shares (34.7% of the issued share capital of VDM).
Kengkong
Issued 500,000,000 shares to Kengkong in terms of the Sub-Underwriting agreement with H&H as detailed in the
prospectus dated 10 December 2013. Kengkong was entitled to an underwriting fee of $75,000 this was repaid in full
by 30 June 2014.
Issued a further 120,000,000 shares to Kengkong on19 March 2014 under the Shortfall Offer contained in the 10
December 2013 entitlement offer prospectus.
On 5 May 2014, VDM executed an agreement with Kengkong to provide funding of $4,500,000 via a convertible loan
to be used for general working capital purposes in the ordinary course of business. The loan is unsecured and is
convertible to 450,000,000 shares upon shareholder approval and at the option of Kengkong. Conversion matters for
the loan will be presented for consideration by shareholders at the Company’s Annual General Meeting to be held
before the end of November 2014. Interest accrues on the loan until the later of its conversion to shares or the
repayment date which is 30 business days after the shareholder meeting. Accrued interest of $32,000 was
outstanding at 30 June 2014.
At 30 June 2014, Kengkong held 620,000,000 shares (19.8% of the issued share capital of VDM). VDM director Mr H
Luk has a controlling interest in Kengkong.
25
VDM GROUP LIMITED
DIRECTORS’ REPORT
For the year ended 30 June 2014
(b)
Amounts recognised at the reporting date in relation to other transactions:
Assets and liabilities
Current liabilities
Trade and other payable
Convertible loan
Total liabilities
Revenue and expenses
Finance costs
Total expenses
Equity
Capital raising costs
Total Equity
Signed in accordance with a resolution of the directors.
Dr D Hua
Executive Chairman and Interim CEO
Perth, Western Australia
26 September 2014
2014
$’000
248
4,532
4,780
205
205
150
150
26
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Auditor’s Independence Declaration to the Directors of VDM Group
Limited
In relation to our audit of the financial report of VDM Group Limited for the financial year ended 30 June
2014, to the best of my knowledge and belief, there have been no contraventions of the auditor
independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.
Ernst & Young
T G Dachs
Partner
26 September 2014
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
TD:MW:VDM:069
VDM GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
For the year ended 30 June 2014
CORPORATE GOVERNANCE STATEMENT
ASX Principles and Recommendations
The Board of Directors (“Board”) of VDM is responsible for establishing the corporate governance framework of VDM
having regard to the ASX Corporate Governance Council (CGC) published guidelines as well as its corporate
governance principles and recommendations. The Board guides and monitors the business and affairs of VDM on
behalf of the shareholders by whom they are elected and to whom they are accountable.
The table below summaries VDM’s compliance with the CGC’s 2nd edition Principles and Recommendations for its
financial year commencing 1 July 2013.
Recommendation
Principle 1 – Lay solid foundations for management and oversight
Comply?
Yes/ No
Reference /
explanation
1.1 Companies should establish the functions reserved to the Board and
those delegated to senior executives and disclose those functions.
1.2 Companies should disclose the process of evaluating the performance of
Yes
Yes
Board function
Performance
senior executives.
1.3 Companies should provide the information indicated in the guide to
Yes
reporting on Principle 1.
Principle 2 – Structure the board to add value
2.1 A majority of the Board should be independent directors.
2.2
The chairperson should be an independent director.
2.3
2.4
The roles of chairperson and chief executive officer should not be
exercised by the same individual.
The Board should establish a nomination committee.
Yes
No
No
Yes
2.5 Companies should disclose the process of evaluating the performance of
Yes
the Board, its committees and individual directors.
2.6 Companies should provide the information indicated in the guide to
Yes
reporting on Principle 2.
Principle 3 – Promote ethical and responsible decision-making
Structure of the Board
Structure of the Board
Structure of the Board
Nomination and
remuneration
committee
Performance
3.1 Companies should establish a code of conduct and disclose the code or a
Yes
Code of conduct
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.
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.
Yes
Diversity policy
3.3 Companies should disclose in each annual report the measurable
Yes
Diversity policy
objectives for achieving gender diversity set by the Board in accordance
with the diversity policy and progress towards achieving them
3.4 Companies should disclose in each annual report the proportion of
women employees in the whole organisation, women in senior executive
Yes
Diversity policy
28
VDM GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
For the year ended 30 June 2014
positions and women on the Board.
3.5 Companies should provide the information indicated in the guide to
Yes
reporting on Principle 3.
Principle 4 – Safeguard integrity in financial reporting
4.1
The Board shall establish an audit committee.
4.2
The Audit Committee should be appropriately structured.
4.3
The Audit Committee should have a formal operating charter.
4.4 Companies should provide the information indicated in the guide to
reporting on Principle 4.
Principle 5 – Make timely and balanced disclosure
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.
Yes
Yes
Yes
Yes
Yes
Audit Committee
Audit Committee
Audit Committee
Market disclosure
policy
5.2 Companies should provide the information indicated in the guide to
Yes
reporting on Principle 5.
Principle 6 – Respect the rights of shareholders
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.
Yes
Shareholder
communication policy
6.2 Companies should provide the information indicated in the guide to
Yes
reporting on Principle 6.
Principle 7 – Recognise and manage risk
7.1 Companies should establish policies for the oversight and management
Yes
of material business risks.
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.
Yes
Risk management
policy
Risk management
policy
7.3
The Board should disclose whether it has received assurance from the
chief executive officer and the chief financial officer that:
Yes
CEO and CFO
certification
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.
7.4 Companies should provide the information indicated in the guide to
Yes
reporting on Principle 7.
Principle 8 – Remunerate fairly and responsibly
8.1
The Board should establish a remuneration committee.
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.
Yes
No
Nomination and
remuneration
committee
Nomination and
remuneration
committee
29
VDM GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
For the year ended 30 June 2014
8.3 Clearly distinguish the structure of non-executives directors’ remuneration
Yes
from that of executives.
8.4 Companies should provide the information indicated in the guide to
Yes
reporting on Principle 8.
Nomination and
remuneration
committee
VDM’s corporate governance practices were in place throughout the year ended 30 June 2014.
Various corporate governance practices are discussed within this statement. For further information on corporate
governance charters, codes and policies adopted by VDM, refer to our website: www.vdmgroup.com.au.
Board functions
The Company has established a Board Charter, which sets out the role, composition and responsibilities of the Board
within the governance structure of VDM. The Board Charter sets out the following key responsibilities and functions of
the Board:
to develop, review and monitor the VDM’s long-term business strategies and provide strategic direction to
senior executives
to ensure policies and procedures are in place to safeguard the VDM’s assets and business and to enable the
VDM to act ethically and prudently
to develop and promote a system of corporate governance which ensures the VDM is properly managed and
controlled
to identify the VDM’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’s financial statements
to monitor management’s performance and the VDM’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 to
be carried on, and to regularly review those delegations
to ensure that the VDM 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 including share and loan capital and dividend
payments
to determine and regularly review an appropriate remuneration policy for employees of the VDM.
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 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 the chief executive officer, executive directors and chief
financial officer which describe, amongst other things, their term of office, duties, rights, responsibilities and
entitlements on termination.
Performance
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.
30
VDM GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
For the year ended 30 June 2014
Structure of the Board
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 VDM, 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 or an employee materially associated with the service provided
is not a material supplier or customer of the VDM or an officer of or otherwise associated directly or indirectly
with a material supplier or customer, has no material contractual relationship with the VDM 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.
The Board has adopted AASB 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 over a 12 month period in the absence of evidence or convincing argument to the contrary. In considering
such evidence or argument, VDM 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 (other than 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:
Mr M Fry (Chairperson of the Audit and Risk Committee)
Mr V Jakovich
Although Mr M Perrott was acting CEO for 15-days from 23 August 2013 to 6 September 2013 the board regards this
as a necessary short-term interim measure that did not compromise his independence. Therefore the board
considers Mr M Perrott to have been an independent director for the entire 2014 financial year.
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, if approval is first given by the chairperson. During the financial year
no directors sought to obtain such independent legal, accounting or other professional advice in fulfilling their role as a
director of VDM.
Nomination and Remuneration committee
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.
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
31
VDM GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
For the year ended 30 June 2014
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 reviewing its effectiveness.
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’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 where required, prior to
implementation
ensure that equity-based incentive plans prohibit hedging of unvested options or performance rights
determine and review superannuation arrangements of the VDM
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 an independent
director. The Board has adopted a formalised policy for the appointment of non-executive directors. The current
committee comprises:
Dr D Hua
Mr M Fry
Mr V Jakovich
Mr H Luk
Due to the importance of remuneration and nomination matters to shareholders, the nominees of H&H and Kengkong,
Dr Hua and Mr Luk respectively, have been invited onto the committee. As the VDM currently has only four directors,
the committee does not have a majority of independent directors. The committee has not appointed a chairman since
the resignation of the previous chairperson, Mr M Perrott.
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 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.
The Nominations and Remuneration Charter sets out the committee’s purpose, membership (including procedures for
attendance by non-members), role, and administrative procedures. The Nominations and Remuneration Charter is
available on the Company’s website.
Code of conduct
VDM 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 VDM’s integrity.
The objective of the Code is to:
provide a benchmark for professional behaviour throughout the VDM
support the VDM’s business reputation and corporate image within the community
make employees aware of the consequences if they breach the Code.
32
VDM GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
For the year ended 30 June 2014
In summary, the Code requires that at all times the VDM personnel act with the utmost integrity, objectivity and in
compliance with the letter and the spirit of the law and the VDM 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’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 VDM’s website.
Diversity policy
VDM recognises the value contributed to the organisation by employing people with varying skills, cultural
backgrounds, ethnicity and experience. VDM believes its diverse workforce is the key to its continued growth,
improved productivity and performance.
We actively value and embrace the diversity of our employees and are committed to creating an inclusive workplace
where everyone is treated equally and fairly, and where discrimination, harassment and inequity are not tolerated.
VDM is committed to fostering diversity at all levels.
The Diversity Policy is available on the Company’s website.
The measurable objectives set by the Board for achieving gender diversity are as follows:
Increase the number of woman in the workforce, including senior management positions and at board level
Create development opportunities for woman that prepare then to take on senior positions
To provide employment opportunities for people with disabilities
Provide flexible workplace arrangement including part time arrangement and other incentives
Review gender pay gaps on an annual basis and implement actions to address any variance
Promote an inclusive culture that treats the workforce with fairness and respect
Provide career development opportunities for every employee, irrespective of any cultural, gender and other
differences
The Company has achieved all objectives set by the Board.
The proportion of women:
employees at VDM: 34% (2013: 21%)
in senior executive positions: 14% (2013: 25%)
on the Board: 0% (2013: 0%)
Audit committee
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.
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
executive officer, 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:
Mr M Fry (Chairperson)
Dr D Hua
Mr H Luk
The charter of the Audit Committee 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 VDM’s website.
33
VDM GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
For the year ended 30 June 2014
Market disclosure policy
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 VDM, 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 VDM.
The Market Disclosure Policy is available on VDM’s website.
Shareholder communications policy
The Communications Policy is based on compliance with VDM’s disclosure obligations and aims at all times to
achieve best practice. The Communications Policy commits VDM to facilitating shareholder participation in the
member meetings and to dealing promptly with shareholder enquiries. VDM believes that communicating with
shareholders by electronic means, particularly through its website, is an efficient way of distributing information in a
timely and convenient manner.
The Company’s Communication Policy is available on VDM’s website.
Risk management policy
The Risk Management Policy is designed to assist in the development of organisational capabilities in risk
management for internal control purposes.
The Board should require management to design and implement the risk management and internal control system to
manage VDM’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 project
execution processes. The focus of risk management is the identification and treatment of risks with the objective to
add maximum sustainable value to 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 VDM’s risk management and internal control framework
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’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.
Regularly scheduled board meetings are held approximately monthly and the meeting agendas and board reporting
framework have been designed to provide information necessary for the board to effectively monitor both
opportunities and threats and be informed of key individual risk matters. Management is required to report to the
board on those risks which could have a material impact on the Company’s business.
The Risk Management Policy is available on VDM’s website.
34
VDM GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT
For the year ended 30 June 2014
CEO and CFO certification
In accordance with section 295A of the Corporations Act, the chief executive officer and the chief financial officer have
provided a written statement to the Board that:
the Company’s financial report is founded on a sound system of risk management and internal control; and
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 required
attestations prior to the Board signing the annual report.
35
VDM GROUP LIMITED
STATEMENT OF COMPREH ENSIVE INCOME
For the year ended 30 June 2014
Continuing operations
Rendering of services
Other revenue
Revenue
Cost of services
Gross profit / (loss)
Administration expenses
Finance costs
Impairment charge
Share based payment write-back
Share of loss from joint venture
Loss from continuing operations before income tax
Income tax benefit / (expense)
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
6
8(a)
8(c)
31
23
9(a)
10
11
11
11
11
Consolidated
2013
$’000
2014
$’000
24,406
184
24,590
(23,859)
731
(17,039)
(245)
(101)
248
-
(16,406)
1,706
(14,700)
127,069
755
127,824
(148,433)
(20,609)
(20,141)
(196)
(17,598)
90
(98)
(58,552)
(14,905)
(73,457)
(6,678)
(21,378)
(10,951)
(84,408)
-
(21,378)
-
(84,408)
(21,378)
(21,378)
(84,408)
(84,408)
(1.06)
(9.04)
(1.06)
(9.04)
(0.73)
(7.87)
(0.73)
(7.87)
36
VDM GROUP LIMITED
STATEMENT OF FINANCIAL POSITION
As at 30 June 2014
ASSETS
Current assets
Cash and cash equivalents
Security deposits
Trade and other receivables
Contracts in progress
Development properties
Investment in joint venture
Inventory
Other assets
Non-current assets classified as held for sale
Total current assets
Non-current assets
Trade and other receivables
Security deposits
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
Lease incentive liability
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
2013
$’000
2014
$’000
13
14
15
16
17
23
18
19
20
15
14
21
9
22
24
16
9
25
26
25
26
27
28
28
3,366
1,242
990
49
3,389
-
150
36
9,222
-
9,222
-
3,584
3,320
-
99
7,003
16,225
5,506
49
858
-
4,760
3,066
14,239
49
175
1,128
1,352
15,591
634
11,857
5,238
12,319
7,848
4,061
1,350
308
621
43,602
900
44,502
258
-
6,359
-
307
6,924
51,426
26,219
7,200
3,152
-
1,782
10,493
48,846
299
-
244
543
49,389
2,037
268,509
636
(268,511)
634
634
248,286
884
(247,133)
2,037
2,037
37
VDM GROUP LIMITED
STATEMENT OF CASH FLOWS
For the year ended 30 June 2014
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
GST refunded / (paid)
Income tax paid
Net cash flows used in operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Release from security deposit
Proceeds from sale of property, plant and equipment
Sale of interest in joint venture
Purchase of intangibles
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 from / (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
29(a)
23
10
13
Consolidated
2013
$’000
2014
$’000
49,002
(81,805)
129
(7)
205
(590)
(33,066)
319,022
(324,548)
455
(243)
(6,837)
-
(12,151)
(1,062)
413
1,899
1,350
(12)
930
-
(644)
2,874
4,500
(1,682)
(1,616)
20,499
21,701
(8,491)
11,857
3,366
(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
38
VDM GROUP LIMITED
STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2014
Issued
capital
$’000
Accumulated
losses
$’000
Equity
reserve
$’000
Other capital
reserve
$’000
Balance at 1 July 2013
248,286
(247,133)
457
427
Comprehensive loss for the year
Total comprehensive loss for the
year
Transactions with owners in their
capacity as owners
Share issued to H&H at $0.01 per share on
27 August 2013
Issue of conversion shares at $0.01 per
share on 29 November 2013
Exercise of bonus issue option at $0.05 per
share on 29 November 2013
Shares issued to Jimblebar creditors at
$0.01 per share on 29 November 2013
Private placement shares issued at $0.01
per share on 10 December 2013
Shares issued under the 10 December 2013
entitlements offer prospectus on 28 January
2014
Shares issued under the Shortfall offer
contained in the 10 December 2013
entitlements offer prospectus on 19 March
2014
Capital raising costs
-
-
(21,378)
(21,378)
1,401
5,000
2
1,440
750
12,147
1,200
(1,717)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at 30 June 2014
268,509
(268,511)
457
-
-
-
-
-
-
-
-
-
(248)
179
Balance at 1 July 2012
248,612
(162,725)
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
(247,133)
457
-
-
-
-
(83)
427
Total
$’000
2,037
(21,378)
(21,378)
1,401
5,000
2
1,440
750
12,147
1,200
(1,965)
634
86,854
(84,408)
(84,408)
(268)
(51)
(90)
2,037
39
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
INDEX
1. CORPORATE INFORMATION
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
4. INFORMATION RELATING TO SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE
5. SEGMENT INFORMATION
6. OTHER REVENUE
7. OTHER INCOME
8. EXPENSES
9. INCOME TAX
10. DISCONTINUED OPERATIONS
11. EARNINGS PER SHARE
12. DIVIDENDS PROPOSED AND PAID
13. CASH AND CASH EQUIVALENTS
14. SECURITY DEPOSITS
15. TRADE AND OTHER RECEIVABLES
16. CONTRACTS IN PROGRESS
17. DEVELOPMENT PROPERTIES
18. INVENTORY
19. OTHER CURRENT ASSETS
20. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE
21. PROPERTY, PLANT AND EQUIPMENT
22. INTANGIBLE ASSETS AND GOODWILL
23. INVESTMENT IN JOINT VENTURE
24. TRADE AND OTHER PAYABLES
25. INTEREST-BEARING LOANS AND OTHER BORROWINGS
26. PROVISIONS
27. CONTRIBUTED EQUITY
28. RETAINED EARNINGS AND RESERVES
29. CASHFLOW STATEMENT INFORMATION
30. RELATED PARTY DISCLOSURE
31. SHARE-BASED PAYMENT PLANS
32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
33. PARENT ENTITY INFORMATION
34. COMMITMENTS
35. CONTINGENCIES
36. SIGNIFICANT EVENTS AFTER THE BALANCE DATE
37. AUDITORS’ REMUNERATION
38. CLOSED GROUP CLASS ORDER DISCLOSURES
41
41
55
57
58
59
59
59
60
62
63
64
64
64
65
66
66
66
66
67
67
69
69
70
71
72
73
74
75
76
77
79
82
83
84
85
85
86
40
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
1.
CORPORATE INFORMATION
The consolidated financial statements of VDM for the year ended 30 June 2014 were authorised for issue in accordance
with a resolution of the directors on 26 September 2014. VDM 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 are described in the Directors Report. Information on the VDM
structure and other related party relationships is provided in note 4.
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.
The consolidated financial statements provide comparative information in respect of the previous period. Certain
comparative information has been reclassified to be presented on a consistent basis with the current year’s presentation.
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 has adopted all new and amended Australian Accounting Standards and AASB Interpretations effective from1 July
2013, including:
AASB 10 Consolidated Financial Statements
AASB 10 establishes a new control model that applies to all entities. It replaces part of AASB 127 Consolidated
and Separate Financial Statements dealing with the accounting for consolidated financial statements and UIG-
112 Consolidation – Special Purpose Entities.
The new control model broadens the situation when an entity is considered to be controlled by another entity and
includes new guidance for applying the model to specific situations, including when acting as a manager may give
you control, the impact of potential voting rights and when holding less than a majority voting rights may give
control.
The adoption of AASB 10 has no effect on the financial position or performance of VDM.
AASB 11 Joint Arrangements
AASB 11 replaces AASB 131 Interests in Joint Ventures and UIG-113 Jointly Controlled Entities – Non-monetary
Contributions by Venturers. AASB 11 uses the principle of control in AASB 10 to define joint control, and therefore
the determination of whether joint control exists may change. In addition it removed the option to account for
jointly controlled entities using proportionate consolidation. Instead, accounting for joint arrangement is dependent
on the nature of the rights and obligation arising from the arrangement. Joint operations that give the venturers a
right to the underlying assets and obligations is accounted for by recognising the share of those assets an
obligations. Joint ventures that give the venturers a right to the net assets is accounted for using the equity
method.
The application of AASB 11 impacted VDM’s accounting for its interest in a joint venture, Quartz South Hedland
Pty Ltd (Quartz South Hedland). VDM sold its 52% interest in Quartz South Hedland on 9 August 2013. Prior to
the transition to AASB 11, Quartz South Hedland was classified as a jointly controlled entity and VDM’s share of
the assets, liabilities, revenue, income and expenses was proportionately consolidated in the consolidated
financial statements. Upon adoption of AASB 11, VDM has determined it interest in Quartz South Hedland to be
classified as a joint venture under AASB 11 and it is required to be accounted for using the equity method. The
comparative information has been restated. It has no impact on the profit or loss, equity or cashflow for the year
ended 30 June 2014.
Consequential amendments were also made to other standards via AASB 2011-7 and amendments to AASB 128.
41
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
Impact on the statement of profit or loss (increase /
(decrease) in profit)
Impairment
Share of loss / profit from joint venture
Loss before tax from continuing
operations
Tax (expense) / benefit
Loss for the year
2014
$’000
-
-
-
-
-
2013
$’000
98
(98)
-
-
-
The adoption of AASB 11 did not have any impact either the OCI for the period or VDM’s basic and diluted
EPS.
Impact on equity (increase/ (decrease) in net equity)
Current assets
Development properties
Investment in joint venture
Total assets
2014
$’000
-
-
-
2013
$’000
(1,350)
1,350
-
Net impact on equity
Impact on cash flow statements (increase/ (decrease) in cash flows
Net cash flows
Operating
Investing
Financing
Net cash (outflow) / inflow
-
-
-
-
-
-
-
-
-
-
AASB 12 Disclosure of Interests in other Entities
AASB 12 includes all disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates
and structures entities. New disclosures have been introduced regarding the judgements made by management
to determine whether control exists, and to require summarised information about joint arrangements, associate
and structured entities and subsidiaries with non-controlling interests.
AASB 12 disclosures are provided in notes 4 and 23.
AASB 13 Fair Value Measurement
AASB 13 establishes a single source of guidance for determining the fair value of assets and liabilities. AASB 13
does not change when an entity is required to use fair value, but rather, provides guidance on how to measure
fair value under Australian Accounting Standards. Application of this definition may result in different fair values
being determined for the relevant assets.
AASB 13 also expands the disclosure requirements for all assets of liabilities carried at fair value. This includes
information about the assumptions made and the qualitative impact of those assumptions on the fair value
determined.
The adoption of AASB 13 had no effect on the financial position or performance of the VDM.
Consequential amendments were also made to other standards via AASB 2011-8 which has resulted in additional
disclosures around the fair values of financial instruments. Fair value hierarchy is provided in note 32 (d).
AASB 119 Employee Benefits (Revised 2011)
The revised standard changes the definition of short-term employee benefits. The distinction between short-term
and other long-term employee benefits is now based on whether the benefits are expected to be settled wholly
within 12 months after the reporting date.
The adoption of AASB 119 has no effect on the financial position or performance of the VDM.
Consequential amendments were also made to other standards via AASB 2011-10.
42
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and
Financial Liabilities.
AASB 2012-2 principally amends AASB 7 Financial Instruments: Disclosures to require disclosure of the effect or
potential effect of netting arrangements, including rights of set-off associated with the entity’s recognised financial
assets and recognised financial liabilities, on the entity’s financial position, when all the offsetting criteria of ASAB
132 are not met.
The adoptions of AASB 2012-2 had no effect on the financial position or performance of the VDM.
AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual improvements 2009-2011
Cycle
AASB 2012-5 makes amendments resulting from the 2009-2011 Annual Improvements Cycle. The standard
addresses a range of improvements, including the following:
-Repeat application of AASB 1 is permitted (AASB 1)
-Clarification of the comparative information requirement when an entity provides a third balance sheet (AASB
101 Presentation of Financial Statements).
The adoption of AASB 2012-5 had no effect on the financial position or performance of the VDM.
AASB 2012-9 Amendment to AASB 1048 arising from the withdrawal of Australian Interpretation 1039.
AASB 2012-9 amends AASB 1048 Interpretation of Standards to evidence the withdrawal of Australian
Interpretation 1039 Substantive Enactment of Major Tax Bills in Australia.
The adoption of AASB 2012-9 had no effect on the financial position or performance of the VDM.
AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management
Personnel Disclosure Requirements (AASB 124).
This amendment deletes from AASB 124 individual key management personnel disclosure requirements for
disclosing entities that are not companies. It also removes the individual KMP disclosure requirements for all
disclosing entities in relation to equity holdings, loans and other related party transactions.
The adoption of AASB 2011-4 had no effect on the financial position or performance of the VDM.
The following standards and interpretations have been issued by the AASB but are not yet effective for the period ending
30 June 2014. VDM has not elected to early adopt any other new Standards or amendments that are issued but not yet
effective. VDM is still evaluating the impact of these standards.
Reference
Title
AASB 2012-3
Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial
Liabilities
Interpretation 21
Levies
AASB 9/IFRS 9
Financial Instruments
AASB 2013-3
AASB 2013-4
AASB 2013-5
Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets
Amendments to Australian Accounting Standards – Novation of Derivatives and Continuation
of Hedge Accounting [AASB 139]
Amendments to Australian Accounting Standards – Investment Entities
[AASB 1, AASB 3, AASB 7, AASB 10, AASB 12, AASB 107, AASB 112, AASB 124, AASB
127, AASB 132, AASB 134 & AASB 139]
Application
date of
standard*
1 January 2014
1 January 2014
1 January 2018
1 January 2014
1 January 2014
1 January 2014
43
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
Reference
Title
AASB 2014-1
Part A -Annual
Improvements
2010–2012 Cycle
AASB 2014-1
Part A -Annual
Improvements
2011–2013 Cycle
Amendments to Australian Accounting Standards - Part A
Annual Improvements to IFRSs 2010–2012 Cycle
Amendments to Australian Accounting Standards - Part A
Annual Improvements to IFRSs 2011–2013 Cycle
Application
date of
standard*
1 July 2014
1 July 2014
AASB 1031
Materiality
1 January 2014
AASB 2013-9
Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and
Financial Instruments
^^
Amendments to
IAS 16 and IAS
38*****
AASB 2014-1
Part B
Amendments to
AASB 119
IFRS 15
*****
Notes:
Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to
IAS 16 and IAS 38)
1 January 2016
Amendments to Australian Accounting Standards - Part B
Defined Benefit Plans: Employee Contributions (Amendments to AASB 119)
1 July 2014
Revenue from Contracts with Customers
1 January 2017
* Designates the beginning of the applicable annual reporting period unless otherwise stated.
*****
These IFRS amendments have not yet been adopted by the AASB.
44
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
Going concern
VDM incurred a net loss after tax from continuing operations for the year ended 30 June 2014 of $14,700,000 (2013:
$73,457,000). Net cash flow used in operating activities was $33,066,000 (2013: $12,151,000). At 30 June 2014, VDM
had net current liabilities of $5,017,000 (30 June 2013: $4,344,000 net current liabilities). The cash position of VDM at 30
June 2014 was $3,366,000 (30 June 2013: $11,857,000) with a further $4,826,000 (30 June 2013: $5,238,000) of security
deposits.
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:
VDM was advanced $4,500,000 on 6 May 2014 under a convertible loan agreement with Australia Kengkong
Investments Co Pty Ltd (Kengkong). On 22 September 2014 entered into a second separate convertible loan
agreement with Kengkong for a further $10,000,000 to be advanced to VDM in three tranches during the period
25 September to 14 November 2014. Conversion of each of the loans into ordinary shares is subject to separate
shareholder approval, and upon such approval being granted Kengkong will have the separate right for each loan
during a period ending one month after the date on which approval is obtained to convert the loans into shares at
a conversion price of A$0.01 per share. The directors expect shareholders to approve conversion of the loans
and also expect that Kengkong will elect to exercise both conversion options. The meeting for shareholders to
consider these matters will be VDM’s annual general meeting to be held before the end of November 2014. If
shareholder approval for conversion of the loans into shares is not obtained or the loans are not converted into
shares by Kengkong, then in the case of the $4,500,000 loan, it must be repaid within 30 business days after the
date of the shareholders meeting held to obtain approval and in the case of the $10,000,000 loan, it must be
repaid within 60 business days after the date of the shareholders meeting and the interest rate will increase from
8% to 13% per annum in from the date that is one month after the date of the shareholders meeting. There are
also fees of up to $145,000 payable by VDM if shareholders do not approve the conversions.
VDM continues to successfully implement the new business strategy as outlined in the Directors’ Report.
VDM raises additional working capital and growth financing for the new business strategy.
VDM has sufficient insurance cover and counterclaims to largely offset any significant legal claims.
Should VDM not achieve the matters set out above, there is material uncertainty as to whether VDM 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 report does not include any adjustments to assets
and liabilities that may be necessary if VDM 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
30 June 2014. Control is achieved when VDM is exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through it power over the investee. Specifically, VDM controls an
investee if and only if VDM has:
Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the
investee)
Exposure, or rights, to variable returns from its involvement with the investee, and
The ability to use its power over the investee to affect its returns
When VDM has less than a majority over the voting or similar rights of an investee, VDM considers all relevant facts and
circumstances in assessing whether it has power over an investee, including:
The contractual arrangement with the other vote holders of the investee
Rights arising from other contractual arrangements
VDM’s voting rights and potential voting rights
VDM re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one
of more of the three elements of control. Consolidation of a subsidiary begins when VDM obtains control over the
subsidiary and ceases when VDM loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the statement of comprehensive income from the date VDM gains
control until the date VDM ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent
of VDM and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into
line with VDM’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating
to transactions between members of VDM are eliminated in full on consolidation.
45
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
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. If VDM 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 or retained earnings, as appropriate, as would be required if VDM had directly disposed of the related assets or
liabilities.
(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 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 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’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 and subsequent settlement is accounted for within equity.
(c) Investment in associates and joint ventures
An associate is an entity over which VDM has significant influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee, but is not control or joint control over those policies.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to
the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
The considerations made in determining significant influence or joint control are similar to those necessary to determine control
over subsidiaries.
VDM’s investments in its associate and joint venture are accounted for using the equity method.
Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The carrying amount of
the investment is adjusted to recognise changes in VDMs share of net assets of the associate or joint venture since acquisition
date.
The statement of profit or loss reflects VDM’s share of the results of operations of the associate or joint venture. Any change in
OCI of those investees is presented as part of VDM’s OCI. In addition, when there has been a change recognised directly in the
equity of the associate or joint venture, VDM recognises its share of any changes, when applicable, in the statement of changes
in equity. Unrealised gains and losses resulting from transactions between VDM and the associate or joint venture are
eliminated to the extent of the interest in the associate or joint venture.
The aggregate of VDM’s share of profit or loss of an associate and a joint venture is shown on the face of the statement of profit
or loss outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the
associate or joint venture.
The financial statements of the associate or joint venture are prepared for the same reporting period as VDM. When necessary,
adjustments are made to bring the accounting policies in line with those of VDM.
After application of the equity method, VDM determines whether it is necessary to recognise an impairment loss on its
investment in its associate or joint venture. At each reporting date, VDM determines whether there is objective evidence that the
46
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
investment in the associate or joint venture is impaired. If there is such evidence, VDM calculates the amount of impairment as
the difference between the recoverable amount of the associate or joint venture and its carrying value, then recognises the loss
as ‘Share of profit of an associate and a joint venture’ in the statement of profit or loss.
Upon loss of significant influence over the associate or joint control over the joint venture, VDM measures and recognises any
retained investment at its fair value. Any difference between the carrying value amount of the associate or joint venture upon
loss of significant influence or joint control and the fair value of retained investment and proceeds from disposal is recognised in
profit or loss.
(d) Current versus non-current classification
VDM presents assets and liabilities in statement of financial position based on current/ non-current classification. An asset is
current when it is:
Expected to be realised or intended to be sold or consumed in normal operating cycle
Held primarily for the purposes of trading
Expected to be realised within twelve months after the reporting period, or
Cash or cash equivalent unless restrict3ed from being exchanged or used to settle a liability for at least twelve
months after the reporting period.
All other assets are classified as non-current. A liability is current when:
It is expected to be settled in normal operating cycle
It is held primarily for the purpose of trading
It is due to be settled within twelve months after he reporting period, or
There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting
period.
VDM classifies all other liabilities as non-current.
Deferred tax asset and liabilities are classifies as non-current assets and liabilities.
(e) Foreign currency translation
Both the functional and presentation currency of VDM and its Australian subsidiaries is Australian dollars (A$).
Transactions and balances
Transactions in foreign currencies are initially recorded by VDM’s entities at their respective functional currency spot rates at the
date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of
exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognized in profit or
loss.
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.
(f) 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 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.
47
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
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.
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.
(g) 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.
48
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
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.
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 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 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. Details of the tax funding agreement are disclosed in note 9.
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 cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
(h) 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 rather than through
continuing use. 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. Once classified as held for sale, they are not depreciated or amortised..
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.
(i) 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.
49
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
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
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.
(j) 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 as a lessee
Finance leases, which transfer to VDM 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 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.
(k) 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.
50
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
(l)
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 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 – 4 years
Development costs – 5 years
(m) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument
of another entity.
(i) Financial assets
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. Loans and receivables are recognized initially at fair value and are subsequently measured at
amortised cost using the effective interest method, less an allowance for impairment. The losses arising from
impairment are recognized in the statement of profit or loss.
VDM assesses, at each reporting date, whether there is objective evidence that a financial asset or group of
financial assets is impaired. 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 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.
51
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
(ii) Financial liabilities
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 prior to the end of the financial year that are
unpaid and arise when VDM 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.
Interest, when charged by the lender, is recognised as an expense using the effective interest method.
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. Gains and losses are recognised in profit or loss
when the liabilities are de-recognised as well as through the effective interest rate amortisation process.
The component of convertible bonds that exhibits characteristics of debt is recognised as a liability in the
Statement of Financial Position, net of transaction costs. On issue of convertible bonds, the fair value of the
liability component is determined using a market rate for an equivalent non-convertible bond and this amount is
carried as a liability on the amortised cost basis until extinguished on conversion or redemption. The increase in
the liability due to the passage of time is recognised as a finance cost. The remainder of the proceeds is allocated
to the equity component and is recognised in shareholders’ equity. The carrying amount of the equity component
is not remeasured in subsequent years.
Except as explained below, borrowing costs are recognised as an expense when incurred. VDM 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.
(iii) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of
financial position of there is a currently enforceable legal; right to offset the recognised amounts and there is an
intention to settle on a net basis, to realised the assets and settle the liabilities simultaneously.
(n) 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.
(o) 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 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.
52
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
(p) Goodwill
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business
combination over VDM’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’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 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 cash flow methodology for all the cash generating units to which
goodwill has been allocated.
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.
(q) Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and security 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.
(r) Treasury shares
VDM's own equity instruments, which are reacquired for later use in employee share based payment arrangements
(treasury shares) are deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or
cancellation of VDM's own equity instruments.
(s) 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.
53
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
(t) Provisions and employee benefits
Provisions are recognised when VDM 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 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.
(u) Share based payment transactions
Equity settled transactions
Senior executives of VDM 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 31.
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 (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
the expired portion of the vesting period.
(iii)
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 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 in relation to equity-settled awards only represents the expense associated with grants to employees
of the parent. The expense recognised by VDM 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.
54
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
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 11).
Shares in VDM reacquired on-market are classified and disclosed as reserved shares and deducted from equity.
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.
(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 participates in joint contracts and VDM’s costs are not representative of overall contract
costs, based on the percentage of VDM’s costs to the total estimated cost for VDM 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 of non-financial assets other than goodwill
VDM assesses impairment of all non-financial assets other than goodwill at each reporting date by evaluating conditions
specific to VDM 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.
55
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
(d) Share-based payment transactions
VDM 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 31. 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.
(e) 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 21.
(f) Accounting for outstanding litigations
Where VDM is involved with outstanding litigation, provisions are raised where claims against VDM 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 35).
56
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
4. INFORMATION RELATING TO SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES
(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 Trading Pty Ltd (formerly VDM
Engineering (Western Operations) Pty Ltd)
VDM Consulting (NSW) Pty Ltd
VDM Consulting (VIC) Pty Ltd
VDM Engineering (Eastern Operations) Pty Ltd
VDM Projects Pty Ltd
VDM Asset Management Pty Ltd
VDM Mining Pty Ltd (formerly Skilful Holdings
Pty Ltd)
Burchill VDM Pty Ltd
VDM Construction Pty Ltd
VDM Equipment Pty Ltd (formerly VDM
Earthmoving Contractors Pty Ltd)
VDM Group Ltd International (Dubai Branch)
Pty Ltd
VDM Contracting Pty Ltd
VDM Construction (Eastern Operations) 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
Barlow Gregg VDM Pty Ltd
VDM Consulting (UAE) Pty Ltd
VDMAHP Pty Ltd*
Quartz Trust
* Dormant entity
(b) Ultimate parent
VDM Group Limited is the ultimate Australian parent entity.
Country of
incorporation
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
% equity interest
2013
100%
100%
100%
100%
2014
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%
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%
100%
57
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
5.
SEGMENT INFORMATION
At 30 June 2013, VDM was organised into three reportable segments for management purposes namely Eastern
Construction, Western Construction and Consulting. Since 30 June 2013, VDM has sold Eastern Construction, which
comprised of VDM Construction (Eastern Operations) and divested the majority of its Consulting Businesses. Both
reportable segments have been recognised as a discontinued operation for the year ended 30 June 2014. The Chief
Operating Decision Makers of the Group are the Board of Directors. Based on internal reports provided to the Chief
Operating Decision Makers, which are used to assess performance and allocate resources, there is only one remaining
operating segment being the provision of construction services in Western Australia. Accordingly, the financial results from
this segment will be equivalent to the financial statements of the Group as a whole for the year ended 30 June 2014.
The four new operating divisions referenced in the directors’ report under VDM’s new business strategy were not in effect
at 30 June 2014.
Major customers
VDM Group has a number of customers to which it provides services. During 2014, VDM had 3 customers that contributed
greater that 10% of revenue. These three Western Australia construction services customers contributed a combined total
of 67% of VDM revenue, with their individual contributions to revenue being 43%, 13% and 11%, respectively.
During 2013, VDM 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.
58
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
6. OTHER REVENUE
Interest
Rental income
Other
Total other revenue
7. OTHER INCOME
Gain on disposal of property, plant and equipment
Total other income
8. EXPENSES
(a) Finance costs
Finance charges payable under hire purchase contracts
Bank loans and overdrafts
Total finance costs
(b) Depreciation and amortisation
Depreciation
Amortisation of development costs and software
Total depreciation and amortisation
Depreciation and amortisation included in cost of services
(c) Impairment charges
Impairment of goodwill (note 22)
Impairment of assets
Impairment of development properties (note 17)
Impairment of non-current assets held for sale (note 20)
Impairment of property, plant and equipment (note 21)
Total impairment charges
(d) 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
2014
$’000
Consolidated
2013
$’000
127
-
57
184
414
206
135
755
1,056
1,056
3,393
3,393
33
212
245
1,284
110
1,394
882
-
-
-
-
101
101
11,335
765
554
(248)
324
12,730
6,164
6,566
50
146
196
2,834
212
3,046
2,476
16,717
370
116
395
-
17,598
45,525
172
1,492
(90)
2,140
49,239
37,567
11,672
59
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
9. INCOME TAX
(a) Income tax expense
2014
$’000
Consolidated
2013
$’000
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 (benefit) / expense reported in the income statement
-
-
-
-
(1,706)
234
14,685
-
(14)
14,905
(1,706)
-
Statement of changes in equity
Deferred income tax:
Paid up capital
Income tax expense reported in equity
-
-
268
268
(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 (benefit) / expense
Income tax (benefit) / expense reported in the consolidated income
statement
Income tax expense attributed to discontinued operations
Aggregate income tax (benefit)/ expense
(16,406)
(6,678)
(23,084)
(6,925)
74
408
6,443
-
-
(1,706)
(1,706)
(1,706)
-
(1,706)
(58,552)
(10,886)
(69,438)
(20,831)
(27)
6,953
14,203
14,686
-
(14)
14,970
14,905
65
14,970
60
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
(c) Recognised deferred tax asset and liabilities
Statement of financial
position
2013
$’000
2014
$’000
Statement of comprehensive
income
2013
$’000
2014
$’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
(59)
-
(59)
(2,447)
(306)
(2,753)
(2,387)
(306)
(2,693)
140
981
-
1,541
720
-
483
727
-
437
(4,970)
59
1,294
73
-
872
3,481
-
483
571
-
449
(4,470)
2,753
-
-
1,154
(156)
-
(669)
2,761
-
-
374
-
11
(782)
2,693
-
(3,457)
306
(3,151)
355
76
14,685
40
(2,308)
-
-
268
(65)
803
4,470
18,324
15,173
VDM has estimated tax losses of $199,524,000 (2013: $98,226,000). Utilisation of the carried forward tax losses by the
company is subject to satisfaction of the Continuity of Ownership Test (“COT”) or, failing that, the Same Business Test
(“SBT”). It is likely that VDM has failed COT during the 2014 financial year, therefore in order to be able to utilise the
losses in the future, VDM will be required to satisfy the SBT. Where VDM derives assessable income in a future income
year, an assessment of whether the same business has been carried on between just before the COT failure and the
intervening period will determine whether the losses are available for utilisation.
(e) Unrecognised temporary differences
At 30 June 2014, there are no unrecognised temporary differences associated with VDM’s investments in subsidiaries, or
joint ventures, as VDM has no liability for additional taxation should unremitted earnings be remitted (2013: nil).
(f) Tax consolidation
Members of the tax consolidation group and the tax sharing arrangement
VDM and its 100% owned Australian resident subsidiaries formed a tax consolidated group with effect from 1 July 2004.
VDM Ltd is the head entity of the tax-consolidated group. Members of VDM 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.
61
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
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.
10. DISCONTINUED OPERATION
On 7 October 2013, VDM sold 100% of the issued share capital of VDM Construction (Eastern Operations) Pty Ltd for
$2,750,000. The business has been recognised in the accounts as a discontinued operation
VDM announced on 28 November 2013 that it had divested the majority of its Consulting Businesses via a series of
management buy-outs. The businesses have been recognised as a discontinued operation.
The comparative discontinued operation results include the sale of Como Engineers Pty Limited, which was completed on
10 April 2013.
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 22)
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 entities / businesses
Assets
Cash and cash equivalents
Development properties
Plant and equipment
Intangible assets
Contracts in progress
Trade receivables
Other assets
Liabilities
Trade and other liabilities
Interest bearing debt
Provision for employee entitlements
Net assets attributable to discontinued operations
2014
$’000
19,988
(24,950)
(4)
(1,712)
-
(6,678)
-
(6,678)
(0.22)
(0.22)
3,666
675
765
80
6,181
1,472
387
13,226
8,714
159
1,274
10,147
3,079
2013
$’000
100,968
(106,013)
(47)
-
(5,794)
(10,886)
(65)
(10,951)
(1.17)
(1.17)
3,869
-
1,063
126
427
2,205
142
7,832
2,353
-
480
2,833
4,999
62
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
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
11.
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
2014
$’000
3,079
(3,666)
(587)
(57)
(644)
(1,708)
731
(1,080)
(2,057)
2013
$’000
5,450
(451)
4,999
(3,869)
1,130
(168)
2,315
(20)
2,127
2014
$’000
Consolidated
2013
$’000
(14,700)
(73,457)
(6,678)
(10,951)
(21,378)
(84,408)
Consolidated
2013
2014
(b) Weighted average number of shares
Weighted average number of ordinary shares for basic and diluted earnings
per share
2,012,060,172
933,884,774
On 5 May 2014, VDM executed a $4,500,000 convertible loan and facility agreement with Kengkong. Subject to
shareholder approval, and upon such approval being granted, Kengkong will have the right to convert the loan into
450,000,000 ordinary shares at a conversion price of $0.01 per share. Refer to note 25(e) for further details.
63
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
12. DIVIDENDS PROPOSED AND PAID
(a) Declared and paid during the year:
Dividends on ordinary shares:
Final fully franked dividend for 2013: nil cents per share (2012: nil
cents per share)
Interim fully franked dividend for 2014: nil cents per share (2013: nil
cents per share)
(b) Dividend proposed, not recognised as a liability:
Final fully franked dividend for 2014: nil cents per share (2013: 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% (2013: 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%.
13. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Total cash and cash equivalents
Consolidated
2013
$’000
2014
$’000
-
-
-
-
-
-
-
-
3,459
-
3,459
3,459
-
3,459
3,366
3,366
11,857
11,857
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
3,366
3,366
11,857
11,857
14. SECURITY DEPOSITS
Current
Security deposits
Total security deposits
Non-Current
Security deposits
Total security deposits
1,242
1,242
3,584
3,584
5,238
5,238
-
-
Under the terms of the agreement with its principal banker and bond provider, VDM is required to place on deposit
amounts as surety for bank guarantees and bonds issued in favour of VDM. The cash placed on deposit was not available
for immediate use.
64
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
15. TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Allowance for impairment loss
Other debtors
Retentions
Loans to related entities (note 30)
Allowance for 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
2014
$’000
Consolidated
2013
$’000
5,891
(5,138)
753
890
16
788
(1,457)
990
-
-
331
99
323
5,138
5,891
4,364
3,108
(877)
6,595
12,684
(2,907)
9,777
2,068
1,143
788
(1,457)
12,319
258
258
5,639
2,741
1,397
2,907
12,684
3,462
2,714
(1,812)
4,364
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
$3,108,000 (2013: $2,714,000 impairment loss) has been recognised by VDM.
(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 32.
(e) Related party receivables
For terms and conditions of related party receivables refer to note 30.
65
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
16. 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 15(c).
17. DEVELOPMENT PROPERTIES
Development properties
Total development properties
2013
$’000
Consolidated
2013
$’000
53,109
5,235
(58,351)
(7)
218,217
(228)
(217,801)
188
42
(49)
(7)
42
7
49
(49)
-
(49)
7,388
(7,200)
188
7,388
460
7,848
(7,200)
-
(7,200)
3,389
3.389
4,061
4,061
Development properties represent an interest in an undeveloped land parcel and a 52% interest in an undeveloped land
parcel held within the Quartz Trust in Western Australia.
No interest was capitalised during the 2014 financial year (2013: nil).
(a) Reconciliation of carrying amounts
At 1 July
Additions
Discontinued operations (note 10)
Impairment of development properties (note 17(b))
At 30 June
(b) Impairment of development properties
4,061
3
(675)
-
3,389
4,081
95
-
(115)
4,061
There was no impairment loss recognised in the statement of comprehensive income in the 2014 financial year of (2013:
$115,000).
18. INVENTORY
Consumables at cost
Total inventories
19. OTHER CURRENT ASSETS
Prepayments
Total other current assets
150
150
36
36
308
308
621
621
66
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
20. 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 (to) / from property, plant and equipment (note 21(a))
Impairment
At 30 June
21. 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
2014
$’000
-
-
900
-
-
(900)
-
-
683
(177)
506
900
-
900
611
(124)
487
8,582
(7,155)
1,427
3,320
Consolidated
2013
$’000
900
900
1,295
-
(950)
950
(395)
900
1,043
(135)
908
-
-
-
2,381
(1,267)
1,114
16,035
(11,698)
4,337
6,359
67
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
(a) Reconciliation of carrying amount
Leasehold improvements
At 1 July net of accumulated depreciation
Additions
Disposals
Write down
Impairment
Depreciation
Discontinued operations (note 10)
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 from / (to) non-current assets held for sale (note 20)
At 30 June net of accumulated depreciation
Plant and equipment under lease
At 1 July net of accumulated depreciation
Additions
Disposals
Depreciation
Transferred (to) / from plant & equipment and leasehold
improvements
Discontinued operations (note 10)
At 30 June net of accumulated depreciation
Plant and equipment
At 1 July net of accumulated depreciation
Additions
Disposals
Depreciation
Transferred (to) plant & equipment under lease and leasehold
improvements
Write down
Transfer from non-current assets classified as held for sale (note 20(a))
Discontinued operations at cost (note 10)
Impairment
At 30 June net of accumulated depreciation
Total property, plant and equipment
(b) Plant and equipment pledged as security for liabilities
2014
$’000
Consolidated
2013
$’000
908
173
(11)
(14)
(101)
(221)
(840)
612
506
-
900
900
1,114
-
(19)
(133)
(7)
(468)
487
4,337
889
(811)
(1,114)
(605)
(100)
-
(1,169)
-
1,427
3,320
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
Included in the balances above are assets of VDM to the value of $487,000 (2013: $1,114,000) granted as security for
hire purchase debts. There are floating charges over the remaining property, plant and equipment, refer to Note 25 (c) for
details of plant and equipment pledged as security for borrowings.
(c) Impairment of property, plant and equipment
Within VDM, recoverable amount was estimated for property, plant and equipment based on current market value. There
was an impairment loss of $101,000 (2013: $nil) 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
At 30 June 2014, freehold land and building to the value of $900,000 was transferred from non-current assets classified
as held for sale to property, plant and equipment as a result of a change in use.
68
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
22. 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 10)
At 30 June
Software
At 1 July net of accumulated amortisation
Additions
Disposals
Amortisation
Discontinued operations (note 10)
At 30 June net of accumulated amortisation
(b) Impairment losses recognised
Consolidated
2013
$’000
2014
$’000
-
-
3,025
(2,926)
99
4,090
(3,783)
307
-
-
-
-
307
12
-
(140)
(80)
99
22,511
(16,717)
(5,794)
-
643
195
(35)
(370)
(126)
307
There was no impairment loss recognised in the statement of comprehensive income during the year ended 30 June
2014 in relation to intangible assets. An impairment loss of $16,717,000 was recognised for continuing operations
during the year ended 30 June 2013.
23. INVESTMENT IN ASSOCIATE AND A JOINT VENTURE
On 9 August 2013, VDM sold its 52% interest in Quartz South Hedland Pty Ltd, a jointly controlled entity involved in the
development of a property for $1,350,000.
VDM’s share of the assets and liabilities as at 30 June 2014 and 2013 and income and expenses of the jointly controlled
entity for the years ended 30 June 2014 and 2013, are as follows:
Joint venture’s statement of financial position
Joint Venture’s current assets
Share of Joint Venture’s 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 2014 and 2013.
-
-
-
-
2,596
1,350
(98)
(98)
69
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
24. TRADE AND OTHER PAYABLES
Current
Trade payables and accruals
Employee related payables
Sundry creditors
GST payable
Total current payables
(a) Fair values
Consolidated
2013
$’000
2014
$’000
3,004
59
2,361
82
5,506
19,162
1,140
5,060
857
26,219
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 32.
(c) Financial guarantees
VDM provides financial guarantees to its subsidiaries by way of a Deed of Cross Guarantee as disclosed in note 33(b).
70
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
25. INTEREST-BEARING LOANS AND OTHER BORROWINGS
Current
Interest bearing loan (9% fixed secured loan)
Australia Kengkong (convertible loan (e))
Insurance premium funding
Hire purchase liabilities (note 34)
Total current interest-bearing loans and borrowings
Non-Current
Hire purchase liabilities (note 34)
Total non-current interest-bearing loans and
borrowings
(a) Fair values
Consolidated
2013
$’000
2014
$’000
-
4,569
-
191
4,760
49
49
1,018
-
442
322
1,782
299
299
The carrying amount of VDM’s current and non-current borrowings approximates 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 32.
(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
487
1,114
16,033
56,739
139
2,085
5,287
7,511
450
7,000
25,000
32,450
The contract performance bond facility limit equals the value of the drawn bonds and the limit automatically reduces as
bonds are returned or expire. The bank guarantee and credit card facilities are available subject to annual review. At 30
June 2014, $1,957,000 (2013: $4,798,000) was drawn on the bank guarantee facility and $5,287,000 (2013: $18,087,000)
was drawn on the contract performance bond facility.
(e) Terms of the convertible note
On 5 May 2014, VDM executed a convertible loan and facility agreement with Kengkong to provide funding of $4,500,000
for ordinary ongoing operations. Kengkong advanced $4,500,000 under the $4.5 million Convertible Loan on 6 May 2014.
The loan is unsecured. Subject to shareholder approval, and upon such approval being granted, Kengkong will have the
right to convert the loan into 450,000,000 ordinary shares at a conversion price of $0.01 per share. If shareholder approval
is not obtained or the loan is not converted into VDM shares by Kengkong, VDM must repay the loan within 30 business
days after the date of the shareholder meeting held to approve conversion. An interest rate of 10% per annum applies on
the loan until 20 October 2014 at which time the interest rate increases to 15% per annum. The conversion matter will be
presented for shareholder approval at the Company’s annual general meeting to be held before the end of November
2014.
71
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
26. PROVISIONS
Current
Provision for employee entitlements
Provision for insurance excess
Provision for warranty
Provision for onerous contracts
Provision for loss making contracts
Total current provision
Non-Current
Provision for employee entitlements
Provision for onerous leases
Total non-current provision
(a) Movements in provisions
2014
$’000
Consolidated
2013
$’000
457
170
765
1,666
8
3,066
10
1,118
1,128
4,324
-
621
-
5,548
10,493
244
-
244
Employee
entitlements
$’000
Insurance
excess
$’000
Warranty
$’000
Onerous
contracts
$’000
Loss making
contracts
$’000
Total
$’000
Balance at 1 July 2013
Discontinued operations
Arising during the year
Utilised
Balance at 30 June 2014
Current
Non-Current
Total provisions
4,568
(1,274)
-
(2,827)
467
457
10
467
-
-
170
-
170
170
-
170
621
-
313
(169)
765
765
-
765
-
-
3,605
(821)
2,784
1,666
1,118
2,784
5,548
-
-
10,737
(1,274)
4,088
(5,540)
(9,357)
8
8
-
8
4,194
3,066
1,128
4,194
(b) Nature and timing of provisions
Insurance excess
A provision is recognised for the balance of the excess expected to be paid on a professional indemnity insurance claim. It is
expected that these costs will be incurred in the next financial year
Warranty
A provision is recognised for expected defect claims on completed construction projects based on past experience. It is
expected that these costs will be incurred in the next financial year. The 30 June 2013 comparatives have been adjusted to
reclassify the provision for warranty of $621,000 from trade payable to appropriately reflect the nature of the obligation..
Onerous contracts
A provision is recognised for expected net unavoidable costs of meeting its obligations under onerous contacts.
Loss making contracts
A provision is recognised for the expected loss on construction contracts.
72
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
27. CONTRIBUTED EQUITY
(a) Ordinary shares
Issued and fully paid
Movement in ordinary shares on issue
Balance at 30 June 2013
Share issued to H&H at $0.01 per share
Issue of conversion shares at $0.01 per share
Exercise of bonus issue option at $0.05 per share
Shares issued to Jimblebar creditors at $0.01 per
share
Private placement shares issued at $0.01 per
share
Shares issued under the 10 December 2013
entitlements offer prospectus
Shares issued under the Shortfall offer contained
in the 10 December 2013 entitlements offer
prospectus
Capital raising costs
Balance at 30 June 2014
(b) Treasury shares
Treasury shares held in trust
Movement in treasury shares
Balance at 30 June 2013 and 30 June 2014
Consolidated
2013
$’000
2014
$’000
268,509
248,286
Shares Value ($’000)
248,286
1,401
5,000
2
933,873,071
140,080,961
500,000,000
43,386
27 August 2013
29 November 2013
29 November 2013
29 November 2013
143,977,917
1,440
10 December 2013
75,000,000
750
28 January 2014
1,214,685,617
12,147
19 March 2014
120,000,000
1,200
3,127,660,952
2014
No.
(1,717)
268,509
2013
No.
222,864
222,864
Shares
222,864
73
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
(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 is targeting to maintain a gearing ratio of less
than 15%. The gearing ratio based on continuing operations at 30 June 2014 and 2013 were as follows:
Interest bearing loans and other borrowings (note 25)
Less cash and security deposits (notes 13 and 14)
Net (cash) / debt
Total equity
Total capital
Gearing ratio (net debt: total capital)
VDM is not subject to any externally imposed capital requirements.
28. 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
Consolidated
2013
$’000
2014
$’000
4,809
(8,192)
(3,383)
929
(2,454)
2,081
(17,095)
(15,014)
2,332
(12,682)
(138%)
(118%)
(247,133)
(21,378)
(268,511)
(162,725)
(84,408)
(247,133)
The retained earnings balance at beginning of 2013 includes a $295,000 correction to the previously reported amount.
The adjustment flows through to the balance at beginning of 2014.
(b)
Movement in other capital reserve
Balance at the beginning of the year
Share based payment (note 31)
Balance at the end of the year
427
(248)
179
510
(83)
427
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 31 for further details of these plans.
74
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
(c) Movement in equity reserve
Balance at the beginning of the year
Balance at the end of the year
Consolidated
2013
$’000
2014
$’000
457
457
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.
29.
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
Assets written off
Allowance for doubtful debts
Net profit on disposal of property, plant and equipment
Share based payment reversal
Settlement transaction costs from sale of subsidiary
Profit on sale of subsidiary
Loss recognised on remeasurement to fair value less costs to sell
Loss on onerous contract
Interest expense accrued
Lease expense
Change in assets and liabilities:
Decrease in trade and other receivables
Increase / (decrease) in contracts in progress
Decrease in other assets
Increase in development properties
Decrease in inventory
Decrease in deferred tax assets
Decrease in trade and other creditors
Decrease / (increase) in provisions
Decrease / (increase) in current tax payable
Net cash flows used in operating activities
(b) Non-cash financing and investing activities
Purchase of property, plant and equipment on hire
purchase
(21,378)
(84,408)
1,468
140
101
114
3,108
(1,058)
(248)
-
-
1,712
3,183
242
194
6,131
(5,531)
198
(3)
158
-
(11,302)
(8,001)
(2,294)
(33,066)
3,705
370
19,486
26
2,714
(3,383)
(90)
451
(879)
4,004
-
-
-
29,249
15,035
1,508
(95)
555
14,968
(18,551)
3,177
7
(12,151)
-
(734)
75
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
30. RELATED PARTY DISCLOSURE
Note 5 provides the information about VDM’s structure including details of the subsidiaries and the holding company.
(a) Ultimate parent
VDM Group Limited is the ultimate Australian parent entity.
(b) Loans to an associate
As at 30 June 2014, $788,000 (2013: $788,000) was receivable from Track Procurement Services Pty Ltd an associate
disclosed in note 4. This loan receivable has been fully provided for.
(c) Transactions with key management personnel
Refer to note 9 in the remuneration report for transactions and balances with key management personnel.
(d) Transactions with related parties other than key management personnel
There were no transactions that were entered into with related parties other than key management personnel during 2014
and 2013.
(e) Compensation for key management personnel
Short Term
Post Employment
Share based payment
Termination benefits
Total compensation
Consolidated
2013
2014
1,476,912
78,940
(248,084)
442,905
1,750,673
2,457,631
155,123
(82,779)
35,649
2,565,624
76
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
31.
SHARE-BASED PAYMENT PLANS
(a) Recognised share based payment expense
Reversal arising from equity-settled share-based
payment transactions
Total share-based payment reversal
(b) Types of share-based payment plans
Consolidated
2013
$’000
2014
$’000
(248)
(248)
(90)
(90)
Employee Option Plan (EOP)
On 31 January 2008 VDM 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. No options lapsed or were cancelled during the year (2013: 90,625).
Executive Performance Rights Plan (EPRP)
Under the executive long term incentive (LTI), awards are made to executives who have an impact on VDM’s performance. LTI
awards are delivered in the form of performance rights. A performance right is an entitlement to acquire a fully paid ordinary
share in the capital of VDM 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 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 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 17,826,087 options lapsed during the year (2013: 16,565,217).
(c) 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
2014
No.
-
-
-
2014
WAEP
-
-
-
2013
No.
90,625
(90,625)
-
2013
WAEP
2.25
2.25
-
The weighted average remaining contractual life for the share options outstanding as at 30 June 2014 is nil years (2013: nil
years).
There were no options granted during the year ended 30 June 2014 and 2013.
77
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
(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
2014
No.
17,826,087
-
(17,826,087)
-
-
2014
WAEP
0.0212
-
(0.0212)
-
-
2013
No.
34,391,304
-
(16,565,217)
-
17,826,087
2013
WAEP
0.0398
(0.0278)
(0.0398)
-
0.0212
The weighted average remaining contractual life for the share options outstanding as at 30 June 2014 is nil years (2013:
0.92 years).
The following table lists the inputs to the model used for the EPRP for the year ended 30 June 2014 and 2013:
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 $
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.
There were no performance rights granted in 2014.
78
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
32. 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’s
business. VDM manages its exposure to these key financial risks in accordance with VDM's financial risk management
policy. The objective of the policy is to support the delivery of VDM's financial targets whilst protecting future financial
security. VDM's principal financial instruments comprise receivables, payables, bank loans and overdrafts, hire purchase
liabilities, cash and security deposits.
VDM 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’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 security deposits is not a material risk due to the short term nature of these
financial instruments.
The financial instruments exposed to variable interest rate risk are as follows:
Financial assets
Cash and cash equivalents (note 13)
Security deposits (note 14)
Financial liabilities
Interest bearing borrowings and loans (note 25)
Consolidated
2013
$’000
2014
$’000
3,366
4,826
11,857
5,238
-
-
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)
+ 1% (200 basis points)
– 1% (100 basis points)
Impact on profit
57
(57)
120
(120)
The movement in profit is due to lower / higher interest income from variable rate cash balances.
Other than retained earnings, there is no impact on equity in the consolidated entity.
79
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
Foreign currency risk
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’s financial position. Currently there is no foreign exchange hedge
programme in place.
At balance date, VDM had no exposure on their foreign financial instruments.
(b) Credit risk
Credit risk arises from the financial assets of VDM, which comprises cash and cash equivalents and trade and other
receivables. VDM’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 manages its credit risk by trading only with recognised, creditworthy third parties, and as such collateral is not
requested nor is it VDM'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 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 13)
Security deposits (note 14)
Trade and other receivables (note 15)
Consolidated
2013
$’000
2014
$’000
3,366
4,826
990
9,182
11,857
5,238
12,319
29,414
80
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
(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 is managed to ensure sufficient liquid funds are available to meet our financial
commitments in a timely and cost-effective manner.
VDM continually monitors its liquidity position including cash flow forecasts to determine the forecast liquidity position and
maintain appropriate liquidity levels. The objective of VDM is to have sufficient cash and finance facilities 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 2014. 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
Consolidated
2013
$’000
2014
$’000
10,432
49
-
10,481
28,709
253
63
29,025
The following table reflects a maturity analysis of financial assets and liabilities based on management’s expectation of
settlement.
Year ended 30 June 2014
Consolidated
Financial assets
Cash and cash equivalents (note 13)
Security deposits (note 14)
Other receivables (note 15)
Trade receivables (note 15)
Financial liabilities
Trade and other payables
Other payables
Hire purchase liabilities (note 34)
Interest bearing loans and borrowings
Net maturity
Year ended 30 June 2013
Consolidated
Financial assets
Cash and cash equivalents (note 13)
Security deposits (note 14)
Other receivables (note 15)
Trade receivables (note 15)
Financial liabilities
Trade and other payables
Other payables
Hire purchase liabilities (note 34)
Interest bearing loans and borrowings
Net maturity
Total
$’000
0-60 days
$’000
61 days - 1
year
$’000
1-5 years
>5 years
$’000
$’000
3,366
4,826
237
753
9,182
1,843
3,663
253
4,722
10,481
(1,299)
3,366
207
237
430
4,240
758
3,663
34
-
4,455
(215)
-
1,035
-
323
1,358
1,085
-
170
4,722
5,977
(4,619)
-
3,584
-
-
3,584
-
-
49
-
49
3,535
-
-
-
-
-
-
-
-
-
-
-
Total
$’000
0-60 days
$’000
61 days - 1
year
$’000
1-5 years
>5 years
$’000
$’000
11,857
5,238
2,542
9,777
29,414
12,289
14,551
676
1,508
29,024
390
11,857
-
2,542
8,380
22,779
11,577
14,551
43
786
26,957
(4,178)
-
5,238
-
1,397
6,635
712
-
317
722
1,751
4,884
-
-
-
-
-
-
-
316
-
316
(316)
-
-
-
-
-
-
-
-
-
-
-
81
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
(d) Fair value
At 30 June 2014 there are no financial assets or financial liabilities which are accounted for at fair value. There is no
difference between the carrying amounts and fair value of financial assets and financial liabilities presented in the
Consolidated Statement of Financial Position.
33. 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
2013
$’000
2014
$’000
54,079
12,685
14,376
12,051
268,509
(268,511)
636
634
26,750
12,651
15,627
10,614
248,286
(247,133)
884
2,037
(22,250)
(22,250)
(93,298)
(93,298)
As at 30 June 2014 VDM Group Ltd had $313,000 (2013: $260,000) 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 35(a) for legal claims against the parent entity.
(d) Property, plant and equipment commitments
VDM Group Ltd had no capital commitments at 30 June 2014 and 2013.
82
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
34. 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
2013
$’000
2014
$’000
2,794
5,788
-
8,582
2,338
5,335
-
7,673
During the year VDM made operating lease payments totalling $2,458,000 (2013: $2,261,000).
Other operating leases entered into on various commercial properties have an average life of between 2 and 5 years
and generally provide VDM 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 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 25)
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 25)
204
49
253
(13)
240
191
49
240
360
316
676
(55)
621
322
299
621
VDM has plant and equipment under hire purchase agreements expiring from 1 to 2 years.
(c) Property, plant and equipment commitments
VDM has no capital commitments at 30 June 2014 (2013: $115,000)
(d) Remuneration commitments
VDM did not have any remuneration commitments at 30 June 2014 (2013: $nil) other than as disclosed in the
remuneration report.
83
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
35. CONTINGENCIES
(a) Legal claim
VDM 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. A number of claims and counter-claims exist at 30 June 2014, the majority of
which would not lead VDM Group to incur material losses. Four matters existing as at 30 June 2014 may lead to VDM
incurring material losses if claims made by counterparties are successful for the full amount of the values claimed.
REG Camp
VDM is the claimant under a contract dispute with the Principal related to works performed by VDM under contract at the
Central REG Accommodation Camp. At this stage both parties have agreed to attempt to have the matter resolved by
means of non-binding expert determination. VDM has not disclosed the value of each party’s claims as it may be
prejudicial to the successful outcome thereof.
Gendredge Pty Ltd
VDM 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 are owed by VDM to Gendredge. VDM
has issued a defence and counter-claim against Gendredge for their repudiation of the contract which was accepted by
VDM together additional costs incurred to engage an alternate subcontractor to complete the work not completed by
Gendredge.
Statements of claim, defence and counter-claims have been submitted to the court. The Parties met in August 2014 in
mediation without an agreed position being achieved at that time. In the event that Gendredge is successful in the courts of
Western Australia, VDM may incur a material loss. VDM has not disclosed the value of the claims as it may be prejudicial
to the successful outcome thereof.
Jimblebar
Since the Notice of Take-over Direction issued to VDM relating to the Jimblebar Ammonium Nitrate Storage Facility
Contract (Jimblebar Contract) on 21 August 2013, VDM has received various claims from BHP for the costs of rectification
of defective works, liquidated damages, costs to complete and monies otherwise claimed due under the Jimblebar
contract. The total amount claimed is approximately $9,000,000. All claims are disputed by VDM Group.
On 19 December 2013 BHP demanded and was paid $2,422,000 under a bond facility provided by VDM under the
Jimblebar Contract, thereby reducing BHP’s claims by that amount.
VDM asserts that it is entitled to around $10,000,000 for variations, delay damages and other payments under the
Jimblebar Contract from BHP. In addition, VDM claims that the Jimblebar Contract was repudiated by BHP when BHP
took action to take out of VDM’s hands all remaining work on 21 August 2013. VDM is currently preparing an alternative
significantly larger claim against BHP under quantum meruit.
VDM continues to seek full resolution of all outstanding matters and will continue to pursue its claims including the
reimbursement of these bonds.
Costs of services from continuing operations includes $2,422,000 to reflect the payment to BHP on 19 December 2013
under the bond facility. No assets or liabilities relating to the above claims have been recognised in the accounts.
Natadola Bay
In 2006 VDM’s insurers were notified of a claim under VDM’s professional indemnity insurance cover for engineering
consulting work provided by one of VDM’s sold consulting businesses. VDM have recently been advised that the Plaintiff
is reviewing their position. VDM has a remaining maximum exposure of approximately $130,000 relating to this matter
under its insurance policy.
(b) Bank guarantees and insurance bonds:
As at 30 June 2014 VDM had bank guarantees with BankWest of $1,957,000 (2013: $4,798,000) given to various clients
for satisfactory contract performance.
As at 30 June 2014 VDM had insurance bonds with Assetinsure Pty Ltd of $5,287,000 (2013: $18,087,000) given to
various clients for satisfactory contract performance.
84
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
36. SIGNIFICANT EVENTS AFTER THE BALANCE DATE
Mr Perrott resigned as a Non-Executive Director of VDM on 7 August 2014.
On 22 September 2014, VDM executed a convertible loan and facility agreement with Kengkong to provide funding of
$10,000,000 for ordinary ongoing operations and project development proposals which are approved by Kengkong ($10m
Convertible Loan). The $10m Convertible Loan is unsecured. Subject to shareholder approval, and upon such approval
being granted, Kengkong will have the right to convert the $10m Convertible Loan into 1,000,000,000 ordinary shares at a
conversion price of $0.01 per share. If shareholder approvals are not obtained for conversion of both the $10m
Convertible Loan and the $4.5m Convertible Loan that VDM also has with Kengkong, or Kengkong does not elect to
convert the $10m Convertible Loan into VDM shares then VDM must repay the $10m Convertible Loan within 60 business
days after the shareholders meeting held to obtain approval (Shareholders Meeting). Interest is calculated at a rate of 8%
per annum until one month after the date of the Shareholders Meeting, and 13% per annum following that date. A default
interest rate of 2% per annum plus the applicable interest rate shall apply to any amount the Company fails to pay by the
time it is due under the agreement. In the event that shareholders do not approve conversion of the $4.5m Convertible
Loan and the $10m Convertible Loan, a fee of A$100,000 is payable by VDM in addition to the $45,000 fee payable in
respect of the non-approval by shareholders of conversion of the $4.5m Convertible Loan. Conversion matters for both the
$10m Convertible Loan and the $4.5m Convertible loan will be presented for consideration by shareholders at the
Company’s Annual General Meeting to be held before the end of November 2014.
37. 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
2013
2014
$
$
126,935
-
129,840
256,775
293,550
8,498
145,279
447,327
85
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
38. 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 Trading Pty Ltd (formerly VDM
Engineering (Western Operations) Pty Ltd)
VDM Consulting (NSW) Pty Ltd
VDM Consulting (VIC) Pty Ltd
VDM Engineering (Eastern Operations) Pty Ltd
VDM Projects Pty Ltd
VDM Asset Management Pty Ltd
VDM Mining Pty Ltd (formerly Skilful Holdings
Pty Ltd)
Burchill VDM Pty Ltd
VDM Construction Pty Ltd
VDM Equipment Pty Ltd (formerly VDM
Earthmoving Contractors Pty Ltd)
VDM Group Ltd International (Dubai Branch)
Pty Ltd
VDM Contracting Pty Ltd
VDM Construction (Eastern Operations) 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
Barlow Gregg VDM Pty Ltd
VDM Consulting (UAE) Pty Ltd
VDMAHP Pty Ltd
Quartz Trust
Country of
incorporation
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
% equity interest
2013
2014
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%
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%
100%
86
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
(b) Entities subject to class order relief
Pursuant to Class Order 98/1418, relief has been granted to VDM Construction 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 Trading Pty Ltd (formerly VDM Engineering (Western Operations)
Pty Ltd), VDM Engineering (Eastern Operations) Pty Ltd, Barlow Gregg VDM Pty Ltd, VDM Consulting (NSW) Pty Ltd,
VDM Consulting (VIC) Pty Ltd, VDM Projects Pty Ltd, VDM Mining Pty Ltd (formerly 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,
VDM Consulting Pty Ltd, BCA Consultants Pty Ltd, Keytown Constructions Pty Ltd, VDM Investments Pty Ltd, VDM CCE
Pty Ltd, VDM Construction Pty Ltd, VDM Developments Pty Ltd, ACN 087 442 877 Pty Ltd (formerly called VDM
Constructions Pty Ltd), VDM Equipment Pty Ltd (formerly VDM Earthmoving Contractors Pty Ltd), VDM Contracting Pty
Ltd, VDM Equity Incentives 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
2013
$’000
2014
$’000
(16,488)
1,706
(14,782)
(6,678)
(21,460)
(58,497)
(14,905)
(73,402)
(10,951)
(84,353)
(245,208)
(266,668)
(160,855)
(245,208)
87
VDM GROUP LIMITED
NOTES TO THE FINANCI AL STATEMENTS
For the year ended 30 June 2014
(d) Statement of financial position
ASSETS
Current assets
Cash and cash equivalents
Security 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
Security deposit
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
2013
$’000
2014
$’000
3,361
1,242
6,690
49
150
-
-
36
11,528
-
11,528
-
3,584
665
3,320
-
99
7,668
19,196
5,812
49
4,760
1,680
3,066
15,367
224
1,128
1,352
16,719
2,477
11,853
5,238
19,410
7,848
308
-
675
621
45,953
900
46,853
257
-
665
6,359
-
307
7,588
54,441
27,110
7,200
1,782
3,974
9,872
49,938
299
243
542
50,480
3,961
268,509
636
(266,668)
2,477
248,286
883
(245,208)
3,961
88
VDM GROUP LIMITED
DIRECTORS’ DECLARATI ON
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 2014 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 2014; and
as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed
Group identified in Note 38 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 D Hua
Executive Chairman and Interim CEO
Perth, Western Australia
26 September 2014
89
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Independent auditor's report to the members of VDM Group Limited
Report on the financial report
We have audited the accompanying financial report of VDM Group Limited, which comprises the
consolidated statement of financial position as at 30 June 2014, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity and the consolidated statement
of cash flows for the year then ended, notes comprising a summary of significant accounting policies and
other explanatory information, and the directors' declaration of the consolidated entity comprising the
company and the entities it controlled at the year's end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal controls as the directors determine are necessary to enable the preparation of the financial
report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors
also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that
the financial statements comply with International Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the financial report, whether due to fraud or error. In making
those risk assessments, the auditor considers internal controls relevant to the entity's preparation and
fair presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
internal controls. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a
copy of which is included in the directors’ report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
TD:MW:VDM:068
2
Opinion
In our opinion:
a.
the financial report of VDM Group Limited is in accordance with the Corporations Act 2001,
including:
i
ii
giving a true and fair view of the company's financial position as at 30 June 2014 and of its
performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
b.
the financial report also complies with International Financial Reporting Standards as disclosed in
Note 2.
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 2 in the financial report which describes the
principal conditions that raise doubt about the entity’s ability to continue as a going concern. These
conditions indicate the existence of a material uncertainty that may cast significant doubt about the
company’s ability to continue as a going concern and therefore, the company may be unable to realise its
assets and discharge its liabilities in the normal course of business.
Report on the remuneration report
We have audited the Remuneration Report included in of the directors' report for the year ended 30 June
2014. The directors of the company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is
to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of VDM Group Limited for the year ended 30 June 2014,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
T G Dachs
Partner
Perth
26 September 2014
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
TD:MW:VDM:068
VDM GROUP LIMITED
ASX ADDITIONAL INFORMATION
For the year ended 30 June 2014
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 11 August 2014.
Shareholder
H&H Holdings Australia Pty Ltd
Australia Kengkong Investments Co Pty Ltd
J P Morgan Nominees Australia Limited
Golden Bloom Investments Pty Ltd
UBS Nominees Pty Ltd
UOB Kay Hian (Kong Kong) Limited
James Howard Nigel Smalley
Austindo (WA) Pty Ltd
Citicorp Nominees Pty Ltd
Jako Industries Pty Ltd
Miss Shan He
Mr Brian Hon Leung Lee
Mr Aaron Francis Quirk
Duncraig Investment Services Pty Ltd
Mr John Finlay Mckenzie Rowley
Mrs Cheng Huang
Mr Joseph Paul Snare
Noel Kennedy Smith
Washington H Soul Pattinson and Company Limited
Mrs Feng Lin
Total
SHARES IN VOLUNTARY ESCROW
There are no shares in voluntary escrow.
SUBSTANTIAL SHAREHOLDINGS
Number of ordinary
fully paid shares held
1,085,110,976
620,000,000
241,220,469
125,000,000
121,404,232
72,470,474
50,000,000
30,000,000
24,478,236
21,219,720
20,502,126
18,000,000
12,558,250
12,400,000
12,000,000
10,500,000
9,364,075
8,000,000
7,000,000
6,897,874
2,508,126,432
% held of capital
34.69
19.82
7.71
4.00
3.88
2.32
1.60
0.96
0.78
0.68
0.66
0.58
0.40
0.40
0.38
0.34
0.30
0.26
0.22
0.22
80.20
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
Australia Kengkong Investments Co Pty Ltd
Number of ordinary
fully paid shares held
1,085,110,976
620,000,000
% held of capital
34.69
19.82
92
VDM GROUP LIMITED
ASX ADDITIONAL INFORMATION
For the year ended 30 June 2014
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
602
802
442
1,441
891
4,178
Number of ordinary
shares
229,548
2,265,648
3,458,082
59,602,070
3,062,105,604
%
0.01
0.07
0.11
1.91
97.90
3,127,660,952
100.00
The number of shareholders with less than a marketable parcel is 2,878 holding in total 33,493,277 shares.
VOTING RIGHTS
All ordinary shares issued by VDM Group Limited carry one vote per share without restriction.
93